I expected there to be some sort of consolidation of the gains this week but yesterday's action took me by surprise. This is roughly the area where I thought the market would correct to and I even though we might head a bit lower. What surprised me is the ease with which we went lower and the lack of fear. I thought if we hit these levels the bears would be growling and there would be renewed fear and panic but that does not seem to be the case.
I still believe that the market should rally through the turn of the quarter or at least not head lower. Seasonality will be strong and the market is still oversold in the intermediate term. What has changed is that I now believe that there is a greater chance that July 4 marks the top rather than July options expiration. I am also unsure that we will surpass the highs from this Monday. It looks increasingly likely that Monday marked the top for this move.
I don't want to make too much of one day's action in light Summer trading but my assessment of the market's condition has deteriorated. There is room for another ugly day this week before strong seasonality kicks in. I still expect us to end next week higher than where we are now but after that the market will be far more dangerous.