Further to the June 4th Market Minute titled "Corrective low draws near" today's market action suggests that the bottom to this retracement may have occurred.

Probability models have indicated that the low in the current pullback should develop sometime in the second half of June (More information is on page 8 of the May newsletter). Today's strong broad-based advance may prove to be that bottom, however, additional follow through with higher price levels will be needed before confirmation. The S&P 500 will need to close above 1300 and the TSX over 13,200.

Nevertheless, evidence from several defensive asset groups are indicating that the correction is likely over. For example, the bond market has started a sell-off in prices (bond prices are trending in the opposite direction to the stock market), the 'safe haven' US dollar has stalled in its rise with increasing selling pressure and healthcare and consumer staples are displaying price weakness again.

Bottom line: The mild correction in the stock markets appears to be over. Additional price increases over the next two days will be needed to confirm.

More research notes about the possible low and the expected movement over the summer will be sent out to subscribers this week.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2011 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present. He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms. He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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