Comments: Near-term looking for stocks to stage a correction lower; commodities to follow; bonds to edge higher; and the dollar to work higher again in the wedge pattern.
Stocks–SPY Daily [last 204.67]: Key juncture. Stocks rallied to bang on the 78.6% resistance level at 205.23 we have been watching and have back off slightly. This would be a natural place for a correction lower in Wave 4 targeting down to 200; with the next target being the swing low at 197.38. If stocks turn down here, we would be watching for a three wave decline because that would strongly suggest the rally phase is not over and we have only seen Wave 3 of 5. In the chart below we have drawn a stylized three-wave corrective decline, i.e. Wave 4. Intermediate-term players may want to sit through a corrective move lower; however the risk to that strategy is the possibility the impulse move from the low is complete, i.e. alternatively we have seen Wave 5 high as labeled in red. But our primary view is the next move is likely corrective. For some more perspective, drilling down to the 4- hour chart, see page 2.
