The indices have staged a nice bounce off of their July 15 lows.  Beaten down financials and airlines have led the charge as short covering has fueled the advance.  The meddling of the SEC, making it harder to borrow shares of certain companies, has also provided an intervention type of bounce.  An intervention bounce is like a tourniquet - it stops the bleeding for a while but it is not a permanent solution. 

Looking at a daily chart of the Nasdaq Composite, the 'T' theory rally is still intact and heading for its completion by August 8.  There is also a new upside projection that is a very possible target.  Based on the 'A' wave into July 17 and the pullback into July 22, the new upside measurement ('C' wave = 'A' wave) is 2400, which coincides almost exactly with the 61.8% retracement level of the May - July decline.  That is good symmetry and will provide solid resistance to this relief bounce.  It will also take care of 'unfinished business' by closing the gap at 2376.29 that was opened on June 26.  Tech stocks are also selectively being punished as the economic slowdown is now seeeping into tech earnings which is a sign that once this bounce runs its course, tech stocks could be the next sector that is roughed up. 

The whole psychology of this market is also setting up for another push lower.  Traders seem to be way too quick in believing that financial company earnings are so bad that this must be a bottom.  OK - even if it IS a bottom for financials (HIGHLY UNLIKELY) - these stocks will not 'V' bottom here and take off to the moon.  There will be at least one more pullback which will test this recent low.  If that test is successful, then I would recommend averaging into the sector.   Now there is talk of a rotation from energy stocks into financials.  Is energy done?  I don't think so.  I think the real buying opportunity for those that are mandated to be fully invested is in the energy patch and in the metals.  Right now for the rest of you, patience and prudence are recommended. 

Our gold setup is unfolding beautifully.  It will be time to buy gold around August 4th as it is pulling back nicely into support to make its cycle low.  This pullback is flushing out weak hands there.  

I will publish new model picks next week for the month of August along with model returns for the month of July.  Remember - our sector model moved to cash, and our country model is in a defensive mode.