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WALL STREET CRAPS MARKET OBSERVATIONS FOR MAY 27, 2012

May 25th, 2012

MARKET OBSERVATIONS FOR MAY 27, 2012:The stock market has been experiencing a bounce off of a very oversold condition in terms of breadth and sentiment. However, the extent of the decline in terms of price has not been significant. With the last closing high for the Dow Jones Industrials being on May 1, I go by the understanding that a major top and major bottom do not occur during the same month. Therefore, a low worth buying still appears to be a few weeks away.

In addition, a major Bradley Turn Date is scheduled for June 12. (Note: Bradley turn dates can be either indicate tops or bottoms.)

Since the May 18th lows, the stock market has had a classic “Dead Cat Bounce” which hasn’t gone up much at all. What has happened is that breadth and sentiment indicators have had a chance to relieve their downside pressure and chew up time. In fact, the short-term sentiment readings are neutral according to SentimenTrader.com which signifies that no action is required for the next few days.

While a successful retest of those lows could occur this coming Tuesday, the more likely scenario is for the market to resume its decline into a mid-June deeply-oversold low.

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In regards to previous comments about Apple (AAPL), this current bounce off of the 1/3 retracement of its prior rally may give way to a 50% retracement to the price of $503. I would also be a strong buyer of this stock if it touches its 200-day moving average which currently stands at $464. This stock remains the most undervalued large-cap growth company in the entire stock market and certainly worth owning on the next major rally either on its own or through ownership in the QQQs.

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