• New highs by end of August
• Commercials still long
• Rates have fallen 40 bp

I believe we are near the lows for this pull back and the next move will be to new highs. Key financial stocks appear to have completed five wave patterns to the down side and should move back up in price. They will likely fail to make new highs setting up a classic divergence with the major indexes and creating a reliable sell signal some time in August.

The commercial traders continue to buy this market and are long record levels. They report on Tuesdays after the close and these stats are released to the public on Fridays. This Fridays report will be telling since it will include their activity on Tuesday’s big sell off.

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Posted by Michael Chapman at 12:00 PM PDT