As expected we pulled back and NDX tested the 1850 area - test of 1250 SPX is still possible (likely). Oils corrective upmove faded very quickly and its not an overall good picture that we fall with oil. Although the commodity sector is the most heavy weighted one with financials. The Goldman trade does not work at all currently (Energy long/Financials short) but soon they might be right starting from October. Oil will make a more severe low around 100 and the coumt of wave A has to to be changed again - we have not seen the low of wave A yet in a bigger context - all corrective attempts were to shallow so far. The market is still overloaded with longs who need to get out. Hedge Funds have a poor performance so far this year and as it seems also commodity biased funds did not catch the turn of the tide and if index funds have to size down their longs might be the driving force of the current selling forces.
In any case we should find the bottom of the current pullback in stocks by end of this week and a forceful short-covering rally might bring us to 1340 SPX within 2-3 weeks. Some indicators show a bottom level which are not to time sensitive but have still a good performance within a week like the Rydex being at .60 - still the VIX is at very complacent levels of 22 which limits the upmove potential and a 16 times forward PE for the SPX is high it should be around 10 but we will get there over time (6-12 months).