Bulls & bears slug it out.

Markets are incredibly whippy as the Bulls and the Bears battle this out. Who will win ?? Tough question.... a couple of times in the past week or two, the Bears have suffered some hefty blows, yet despite hitting the canvas a couple of times, they have bounced back surprisingly fast. The Bulls have expended an awful lot of energy trying to floor the Bears, and though (in my humble opinion) they still have the strongest punch (and will probably win this battle over the long-term), unless they land the fatal blow pretty damn soon, they will have to stand back and recharge themselves. This will give the Bulls, who seem to have incredible stamina and reserves of energy but a lighter punch, the chance to pull themselves back into this one, for now......

Interesting price action on the CAC Index. - The CAC has been one of the leaders on the decline in risk and stocks over the past 4/5 weeks. Over the past few days, the CAC appears to have completed a rare 'Bullish Island Reversal' (See chart below). This is a strong hint that this index may be due for a more meaningful correction. Also note the reversal higher in Sep Eurodollar futures, following the large hammer candle which I alluded to a couple of days ago, has continued. - Additionally, it is worth noting that there has been a strong correlation between the EURUSD and the CAC in recent weeks, however the recent low on the CAC was not confirmed by a new low on the EURUSD, and this non-confirmation may also be significant.

With regard to the S&P index. The past 4 trading days have seen 'extreme indecision'. This can be seen on the following 2 day candle chart. If this is going to reverse/correct higher, it is going to be essential for the S&P to make a 'Sustained break' above the high of the past 4 days around 1091.