While the CRB did so early last week.

It is notable that the CRB made a low at the same time as the S&P500, while the BDI did so a week later. Not sure what that means. Could be the BDI is losing it’s touch. Or that the transportation sector is not as confident about the state of things.

Also, looking to the performance of the Shanghai Index:

If not as energetic a bounce, at least the Chinese market has found some legs in the face of the seemingly tighter credit conditions.

So what does it all mean?

Blogs like The Smart Money Tracker have been arguing that we are due for stage three of this cyclical rally. While White Magic & its Exposure makes a good case that whatever logic would suggest, the technicals are supportive of a strong push higher .

With prices rebounding strongly off their recent lows have to consider the alternative that equities can go on to make new highs. So while the fundamentals, don’t support it – if anything liquidity has peaked, broad money is still contracting, and the industrial production based leading indicators suggest that the global recovery may be topping – these may be yet to exert their pull.

Technically, we are about to enter the real resistance zone where any nervous longs may be anxious to sell.  The manner in which the S&P500 pushes through this resistance will say a lot about the market’s ability to go on an make new highs.

For the moment then it’s a market neutral position – though still with underweights in materials and financials while overweight in health care and staples.  Got a watching brief on the property and utilities sectors – think there may be opportunities amongst some of the recapitalised stocks but that is for another day.  It may hurt over the near term as risk appetite could go on a tear – but don’t like the risk/return of moving up the risk curve from here.

And if you really want to get inside the third leg – here is Rolf Harris and his timeless contribution to Elliot Wave Theory – Jake the Peg: