Sung to the tune of the Rolling Stone's "(I Can't Get No) Satisfaction," the bears (the few that remain) are feeling the same way. The choppy pullback from last week is looking like the bears might have to wait at least a little longer.

Wednesday's Market Stats

Last week's high still has the potential to be an important high for the market but with each passing day it's looking like we have just a corrective pullback that will lead to a push higher. The few remaining bears are likely singing the Rolling Stones' song "(I Can't Get No) Satisfaction" as they continue to be amazed by the resiliency of this market.

It was relatively quiet during the overnight session and there were no market-moving economic reports this morning. That left the market to fend for itself and initially that led to a small decline out of the gate but then after the first hour of trading the dipsters couldn't stand it any longer and started lifting the market back up. By the end of the day the DOW was challenging Tuesday afternoon's high near 17086 (after dropping to a low of 16974). The bears have no more hair to pull out and they are now running around naked.

We have plenty of signs, including various sentiment measures, which tell us there are very few bears left and there's a lot of complacency by the bulls. The dipsters do what they because it has worked for so long but when most expect something it's usually a good time to be a bit of a contrarian. It doesn't pay to be a contrarian too early, which I tend to be, but it pays to be alert to the possibility that there are too many chasing the market in one direction since a reversal could happen fast and violently as the masses disembark en masse.

Last week's Investor's Intelligence sentiment survey showed 56.1% bulls and 13.3% bears, for a 42.8% spread. Anything over a 40 spread is dangerous territory for bulls. This week's numbers show a small increase for both sides -- 57.6% bulls and 14.1% bears, for a 43.5% spread. Bulls are playing with fire here even if the measure is not a good market timing tool.

An interesting sentiment measure is the CNBC viewership, as shown on the chart below. A recent article at zerohedge.com showed this chart and as you can see, viewership is down to a low not seen since 1992. During the 2002-2007 bull market it also dropped down near the current level, which was another time when the market seemed to only know up as the direction (following the pullback in the first half of 2004). CNBC should be rooting for a market collapse so they can get viewership and advertisers back (like the spike following the 2008 market collapse). Traders are simply not interested in either CNBC, the market or both.

CNBC viewership, 1991-August 2014, chart courtesy ZeroHedge.com

At the end of August I had reviewed the Gann Square of Nine chart to review the two important levels for SPX on the chart (1998 and 2007). Since then we now have an interesting correlation of time and price pointing to a potentially important high in early September. Once SPX got through 1998 the next important level is 2007, which is opposite the March 2009 low near 667. It would be more than a little interesting if the 2009-2014 bull market was capped at opposite ends of the vector through the low and high of the bull market on the Gann Sof9 chart.

Gann Square of Nine chart (vertical middle section)

SPX rallied above 2007 twice, on September 3rd and 4th, but was unable to hold above 2007. It then closed at 2007 on September 5th and so far that's its all-time closing high. From a Gann perspective, with the chart above, it would be easy to call a major high now in place. The weekly chart below shows it occurred at the trend line along the highs from April 2010 - May 2011 and did so with a significant bearish divergence against the July highs. From a weekly perspective the wave count looks complete with the confirming bearish divergence for the 5th wave.

S&P 500, SPX, Weekly chart

For those who love to play with numbers, the intraday all-time high on September 4th was 2011 and 2011 days from the March 6, 2009 low gives us September 5th, which is when we had the all-time closing high at the important Gann 2007 level. Gann would have loved this setup for a market reversal.

I've had 2015 on my charts as a possible upside target (the 127% extension of the July-August decline) but it would also be interesting if we achieved a high of 2014 in 2014. As for future potentially important days, some cycle studies, which pointed to September 4th as an important turn date, show September 18th as the next important turn date. Alibaba is expected to price its IPO on that date and then we have quadruple witching on Friday, September 19th. The Autumnal equinox is on Sunday, September 21st. If the market does drop lower in the coming week I think it will be important to watch for a possible low by the end of next week (opex week).

In the above paragraph I mentioned the 127% extension and if I use this extension off the July 3 - August 7 a-b-c pullback, as shown on the daily chart below (instead of off the July 24 - August 7 decline), that extension points to 2007.57. The September 5th high was 2007.71. I'm sure this is all purely coincidental with the Gann 2007 level (wink), but the linkage between Mr. Fibonacci and Mr. Gann is potentially very strong here.

S&P 500, SPX, Daily chart

Key Levels for SPX:
- bullish above 2015
- bearish below 1972

Looking at the daily chart above it's not hard to view last week's high as an important high, even if not THE high. The oscillators have rolled over from overbought (and MACD has crossed down) and an uptrend line for the rally from August 7th has clearly been broken. We don't yet have confirmation of a trend change so a rally back above 2007 would be a bullish move. It's not confirmed bearish until SPX is driven below 1972 so in the meantime this could go either way in the coming week.

The problem for the bears right now, other than the fact that the market refuses to sell off, is that the move down from last week's high has been choppy (overlapping highs and lows within the move down) and that makes it look like a correction to the rally instead of something more bearish. On the 60-min chart below I've drawn a parallel down-channel for the pullback and it could easily fit as a bull flag pattern as an a-b-c correction. I'm now watching carefully for evidence that the pullback has completed and a new rally leg has started but so far there's no strong evidence either way.

The alternate interpretation of the pullback pattern is very bearish since from an EW (Elliott Wave) perspective it means we're in a series of 1st and 2nd waves down and it's getting ready to unwind the wave count in a series of 3rd waves to the downside, which would likely be a strong move (at least down to the 1950 area in a couple of days and then stair-step lower in a week's time). The series of lower highs since last week needs to be broken in order for the bulls to negate the bearish potential, starting with last Friday's closing high near 2007. We'd have a bullish heads up above 2000, which was yesterday's midday high (which was a bearish back-test and kiss goodbye against the broken uptrend line from August 7 - September 5).

S&P 500, SPX, 60-min chart

In addition to the Gann Sof9 chart we have the moon phases coinciding with a potential market high as well. As can be seen on my MPTS chart below, the choppy price pattern between August 26th and the marginal new high on September 4th (and closing new high on the 5th), which might have been part of a rounding top, occurred between the new moon on August 25th and the full moon on September 9th (yesterday). We don't know yet if THE top is in place but that's the possibility here.

SPX MPTS Daily chart

The DOW looks very similar to SPX and the 2-week consolidation/pullback can easily be interpreted as a bullish continuation pattern. At this morning's low it tested both its 20-dma, near 16992, its uptrend line from November 2012 - February 2014, near the same level, and price-level S/R at 16970-17000 (the morning low was 16974). As long as the bulls can defend 16970 on a closing basis they control the tape. If support breaks, the next support level will be the 50-dma, currently near 16915.

Dow Industrials, INDU, Daily chart

Key Levels for DOW:
- bullish above 17,150
- bearish below 16,970

For the past 2-1/2 weeks NDX has been doing battle with two trend lines -- the one along the highs from April 2010 - April 2012, which is where it closed today, and the broken uptrend line from June 2013 - February 2014, currently near 4115. As with the other indexes, the daily oscillators have rolled over from overbought and bearish divergence but if price continues to trade sideways while MACD drops down the zero line we'd have a bullish setup. Today NDX almost tagged its 20-dma at 4052, with a low near 4054, so the bulls would like to see that support hold. A drop below 4050 would be a bearish heads up whereas a rally above 4120 would be bullish (not sure how high but it certainly would hammer a few more shorts).

Nasdaq-100, NDX, Daily chart

Key Levels for NDX:
- bullish above 4120
- bearish below 3985

It will important to see how the semiconductor index does from here. This is one of my favorite indexes to watch because it's a good indicator for economic health and since it's an important driver for the tech indexes. At the moment I see a possible high for the SOX but with no confirmation yet (similar to the broader market indexes). Back at the end of June I was thinking we'd soon see a high near the price projection at 656.57, which is where the c-wave of an A-B-C bounce off the November 2008 low would achieve 162% of the a-wave. There was a double top high near 652 in July but the 656 projection wasn't achieved. Monday's high at 656.03 can be considered close enough for government work and as can be seen on its weekly chart below, at the same time it has stalled at the mid-line of its up-channel from November 2012 and is showing significant bearish divergence if it rolls over from here. A drop below 620 would be the fat lady singing the blues for the SOX (and the broader market).

Semiconductor index, SOX, Weekly chart

Yesterday the RUT closed marginally below its 20-dma, near 1163 today, and this morning it had broken marginally below its 50-dma, at 1156, but closed back above both today. I don't show the short-term downtrend line from last week's high but it's currently near 1165, which is where it closed today. That's also the location of a broken uptrend line from the August 1-7 lows so there's the potential for a back test and kiss goodbye here. The bulls need to rally this above 1165 and make it stick otherwise a drop below this morning's low would look more bearish, especially if it drops below its 200-dma near 1151.

Russell-2000, RUT, Daily chart

Key Levels for RUT:
- bullish above 1183
- bearish below 1150

Last week I showed the weekly chart for TLT and suggested it could be ready for a stronger pullback over the next couple of months since this year's rally looks to have completed a 5-wave move up. There's been a larger pullback since the August 29th high but it remains inside its up-channel from the December 2013 low, the bottom of which is currently near 114 (today's low was 114.79). It's certainly possible TLT will simply continue higher but a break below 114 would be a good signal that TLT will pull back further to correct this year's rally before heading higher next year.

20+ Year Treasury ETF, TLT, Daily chart

Another bond chart, this one of the high yield (junk) variety, is providing another warning sign for the bulls. HYG normally tracks very close to the stock market since investors' appetite for risk for stocks and junk bonds closely correlate. But notice on the daily chart below how quickly it plunged following the June high, well ahead of the stock market high in September (so far). I see two warning signs here: first, the very strong plunge lower demonstrates the risk I discussed last week about ETFs in general -- with their large sums of money invested in them they haven't been battle tested in a bear market and selling can quickly get out of control; second, the strong selling following the bounce to a lower high on August 27th is further indication investors don't want to exposed to the risk in these bonds. It's only a matter of time before investors in stocks feel the same way.

High Yield Corporate bond fund, HYG, Daily chart

The U.S. Dollar has been on fire and it climbed a little higher above its downtrend line from 2010-2013, currently near 83.40. That line should now be support on a pullback but I don't see much higher before it will pull back further to correct the rally from May. A rally up to its downtrend line from 2009-2010, currently near 87, continues to look like an upside target over the next several months (maybe faster).

U.S. Dollar contract, DX, Weekly chart

In the race for the bottom in currency valuations, the ECB's actions (lowering their interest rate and threatening to add a trillion euros to their balance sheet) tanked the euro's value against other currencies and as can be seen on its monthly chart below, the rollover is from May's test of its downtrend line from 2008-2011. The pattern calls for a quick retracement of the small rising wedge pattern from the July 2012 low, at 1.207, and will likely head for the bottom of its down-channel, which will be near 1.08 by the end of the year.

Euro, Monthly chart

I'm beginning to doubt gold's ability to make one more bounce before tumbling lower. It might skip the bounce and just tumble instead. A drop below 1240 would likely lead to a drop to just below 1200 before I would again look for the possibility for a bounce back up before heading for the 1000 area. If the gold bulls arrive in time, there's still the potential for a rally up to about 1350 before it starts a more serious decline into early next year. Silver (not shown) is close to testing price-level support near 18.60 (June-July 2013 and then January, May and June of this year) so if that holds we could see both bounce back up. But silver below 18.60 and gold below 1240 would likely lead to a couple of weeks of selling before looking for support.

Gold continuous contract, GC, Weekly chart

Short-term bullish divergences suggest oil could be nearing a tradable bottom for the decline from June. But the pattern now looks bearish so a bounce over the next month or two could lead to a nice short trade in oil. We might see a bounce into November for a back-test of its broken uptrend line from June 2012, near 100 by then.

Oil continuous contract, CL, Weekly chart

It's quiet again for economic reports Thursday morning so the market will left to react to geopolitical events. Friday will be a little more important with retail sales and Michigan Sentiment.

Economic reports and Summary

Last week was a good setup for a market top and it remains possible the top is now in place. But the pullback from last week looks corrective enough to suggest new highs are coming. There are certainly enough dipsters who keep propping the market back up. We had many signs of distribution into last week's highs and the propping we're seeing (to a series of lower highs so far) could be more evidence of controlled selling by big funds to retail traders. In one sense, the series of lower highs since last week is a down trend and as shown on the charts, such as for SPX, price remains inside a down-channel from last week.

The bottom line is that I could argue for new highs as well as I could argue for new lows. The important thing though is that upside potential is dwarfed by downside risk. This is especially true from an EW perspective since the bearish wave count calls for a strong break to the downside as a series of 3rd waves are unleashed. A drop below this morning's lows could usher in much stronger selling. But we do not have enough evidence yet to call last week's highs THE highs yet and that warrants caution by those who want to try the short side. Keep a tight leash on short positions and a break of the series of lower highs should be enough to get you out of your position. Trade carefully or stay patient and watch for a little longer. We should have an answer in the next day or two.

Lastly, tomorrow is the Thursday prior to opex week and is known to be a head-fake day. Usually it's a selloff in the morning followed by the start of a jam back to the upside and into opex. This time there's the possibility the end of opex will mark a tradable bottom but again, we should have a clearer picture of that possibility by the end of the week.

Good luck and I'll be back with you next Wednesday.

Keene H. Little, CMT

In the end everything works out and if it doesn't work out, it is not the end. Old Indian Saying