MARKET TO UNDERGO CYCLICAL CORRECTION AFTER TOP THIS WEEK.

The market has gained 60.38 percent since the March low, led by the New Economy stocks. Major corrections are usually not forthcoming without a serious weakening in this sector. This has not happened, as yet, with one (1) of our measures recording an all time high last week. (See Amazon new all time high) Without a breakdown in the New Economy stocks, the downside is limited to a modest correction in the four (4) to six (6) percent range.

Premise 1: The stock market will be range bound in the foreseable future between 110.31 and 101.68 basis the SPY between now and yearend. (See Daily SPY chart, http://www.feargreed.com/1024SPYd.html)

Premise 2: An important cyclical peak will arrive between 10/28 - 10/30, before the major part of the downtrend begins.

Premise 3: Important Fibonacci Cluster Resistance levels between 109.30 - 109.71 are shorting levels using 111.38 Protective Stop. We leave open the possibility of a spike to 109.98 which remains an "unsatisfied" SPY level reached overnight on 10/23. (See 5 min SPY chart, http://www.feargreed.com/1024SPY5.html)

Initial downside targets 106.64, 105.77 with maximum downside targets 104.80, 103.77. (See 89 min SPY chart, http://www.feargreed.com/1024SPY89.html)

Reasons for a market correction now:

1. Modestly Bearish VDI has intensified with increasing Downside Volume.
2. Sentiment Bearish confirmed two (2) weeks ago - see previous Commentary.
3. Back to Back Bearish Weekly Squats with Friday's close under 503.10 (basis OEX).
4. Breadth turns modestly bearish with lower NYSE 52 week highs despite higher prices and higher 52 week lows.
5. Bearish momentum divergences building to a 5th sequence this coming week.

In the chatroom on Friday, we came in short 109.36, adding a 2nd unit short overnight at 109.75 - - exiting 109.53 for +.22, exited unit 1 109.43 for -.09, reshort 109.94 overnight, exited 109.35, for +.59.

FLAT OVER WEEKEND looking to reshort 109.30 - 109.71 using 111.38 Protective Stop.

Short SPY points for most recent series +5.89.
Short SPY points (incl. all previous series 30 weeks +88.57).