FOR THURSDAY: (2/8) Trade not liking the bond auction or the fiscal irresponsibility of the budget but the House will probably pass and probably a lame end of years of kicking the can. In the meantime, stocks are in complicated congestion pattern, and that means you get these big waves and bounces. Can’t touch overnight.

TRADING RECOMMENDATION: Wait for morning comments.
S & P ANALYSIS FOR THURSDAY: (2/8) Got a Senate budget deal and now have to wait for the House but the trade sold off a terrible 10-year auction–and that’s no wonder if rumors that China is not buying as much are true. It could be that the A-wave completed at 2726 and that the market is doing the B-wave retracement 2603.50 or max. 2571.75 and then will go higher to 2802. The chances of new lows right away are down to 4%. Market down in the night session. Too crazy to take any position overnight but it may be a buy at 2602 on Thursday.
OVERALL: We’re assuming that a large 3-wave bounce of 78% will work up to 2802.50 but it may not happen in a straight line. More than likely, a drop to at least 2602 will happen before the next push up, and certainly 2594 will hold. The chances of the market making new lows this week are fairly small. We still think cycles into Friday are messy. I suspect many people won’t have a clear idea of this congestion triangle pattern and will just see craziness.
CYCLE SYNTHESIS: Topping Thursday; lower into Friday.

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