Last fall we commented on the "4-day coil" (successive inside-days, yet with relatively high volatility) in Global Crossing, and suggested that its resolution would set the tone for the high tech market on an ongoing basis. Global Crossing in that instance broke to the topside in a last hurrah rally before collapsing.

Now we see a very similar formation developing on the Value Line Index -- only on a monthly basis. A break higher now could lead to a multiple series of months of extreme volatility while new highs are made, followed by an eventual collapse. We have penciled in to the chart below the "look-alike" pattern one might expect to see.

Chart produced using Advanced GET End-of-Day

3770 was our initial target for a rally in the Nasdaq 100, but the speed with which we reached it is frightening. While it is clear that the sector to be long within the entire equity market is now the gold stocks (always the last to participate within the various cyclical shifts, and finally coming to life as of Friday) as opposed to the large cap high techs, the broader indices still are not to be underestimated as to how much they may rally.

Are we experiencing a 2-wave bounce, or the bigging of a final 5th wave advance? It may well depend which index you key off of, but this recent frothiness has some time and distance still to travel -- at least basis the NYA and Value Line indices. Long options gamma, with a long positive bias to gold stocks remains the way to be appropriately positioned.

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Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.