The market is at what I consider a critical juncture as all of the major indices have closed up for the second week in a row. Notice on the weekly charts of the indices that for the past 2 years not once have the indices closed up for 3 weeks in a row in the midst of an intermediate downtrend. In other words, every major up move began with at least 3 up weeks in a row. April of 2001 on the Nasdaq was the exception with most of the move put in the first 2 weeks followed by a down week. The current intermediate downtrend began in early December and was interrupted by a 2 week minor uptrend in late December and early January. This has been the pattern for the last 2 years. Whenever the market was able to put in 3 up weeks in a row it was often followed by a significant intermediate uptrend. And not only that, it was required for each significant up move. If the low put in on Thursday 2/13/03 is to be an intermediate low, then next week better be a positive week. In which case even more upside follow through will be probable. I do not believe this will occur. Instead I believe the past 2 weeks have been a minor uptrend similar to late December and early January. The low volume is not typical of intermediate term bottoms. That said, there are some reasons for caution to the short side. Sentiment is starting to become excessively bearish though not at an extreme (other than the AAII which is at an extreme but on average the bull/bear ratio bottoms several weeks prior to a market bottom). This is usually a contrian indicator. Several other internal market indicators are near extremes as well which I will get to a little later."
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