Lookng at Wednesday's candle, there is no doubt that Wednesday's session was an impulse day. The market is just below its historical high and it is well placed for printing new highs in coming sessions.

Looking at freshly released sentiment data , we notice a pick up in 'bull' sentiment but we are still well below 2000's levels. So , it remains more room before we reach euphoria levels.

Looking at our indicators, there is no doubt that Wednesday was a strong impulse day. The Sigma Trend Index jumped back in positive territory, the swing surge to '5' and the Power Level was at '4'.

The ST model computed new stop levels for both the SPX and the NDX:

Short Term Trading Book:

- SPX: long at 1787.18 (stop @ 1748, 3pts below the ST model to take into account bid/ask spread)

- NDX: long at 3475.53 (stop @ 3372, 5pts below the ST model to take into account bid/ask spread)

- CAC: long at 4115.38 (stop @ 4032, 5pts below the ST model to take into account bid/ask spread)

- DAX: long at 9164.04 (stop @ 8808, 10pts below the ST model to take into account bid/ask spread)

- EStoxx: long at 2974.13 (stop @ 2856, 5pts below the ST model to take into account bid/ask spread)

Medium Term Trading Book:

- No more medium term position at this stage.

Out of model position: (in case of a blow off rally like in 2000)

- 1 call NDX January 2014 strike 3700 @ 5.06

We wrote during the week-end that the market was in danger. The market decided to bounce back and Monday's move sounds like a positive impulse day in Europe while the bounce back is more muted in US.

The Sigma Whole Market Index was able to move back above the top of the red uptrend channel and this is another positive sign.

So, the big question is: Was it an 'abc' correction? Is this correction already over?

When we look at European indexes, the bounce back looks like an impulse move: in one session, the market was able to retrace several days of decline. On top of that, it is clearly possible to count recent decline as an 'abc' move.

Looking at our indicators, the Swing jumped to '4' while the TL had been at '1' during a couple of session. So, the ST model generated a fresh 'buy' signal. (for more details on our methodology, click on 'methodology' in the right column)

So, we closed our short positions and opened long positions at the end of US session:

- 1 short CAC closed at 4115.38 => 4272.14 - 4115.38 = 156.76 (gains)

- 1 short EuroStoxx closed at 2974.13 => 3027.17 - 2974.13 = 53.04 (gains)

- 1 short SPX closed at 1787.18 => 1792.26 - 1787.18 = 5.08 (gains)

Short Term Trading Book:

- SPX: long at 1787.18 (stop @ 1739, 3pts below the ST model to take into account bid/ask spread)

- NDX: long at 3475.53 (stop @ 3367, 5pts below the ST model to take into account bid/ask spread)

- CAC: long at 4115.38 (stop @ 4032, 5pts below the ST model to take into account bid/ask spread)

- DAX: long at 9164.04 (stop @ 8808, 10pts below the ST model to take into account bid/ask spread)

- EStoxx: long at 2974.13 (stop @ 2856, 5pts below the ST model to take into account bid/ask spread)

Medium Term Trading Book:

- No more medium term position at this stage.

Out of model position: (hedge against a blow off rally like in 2000)

- 1 call NDX January 2014 strike 3700 @ 5.06

When we look at the chart of the Sigma Whole Market Index, we can notice the index slid below its support and (re)entered the (red) uptrend channel. The top of this uptrend should (normally) act as a resistance now.

If we drop until the blue horizontal support, a head and shoulders could be under construction..

Looking at the CAC40, we tested the first horizontal support and the market printed a 'doji' on Thursday. So, a rebound is now possible. If we go through the (first) support, the next target is the 3940's area.

The EuroStoxx 50 went through its first support and the next one is around 2875.

Looking at our indicators, there is no change. The Trend Level(TL) remains at '1' so if we get a positive impulse day, the ST model will generate a buy signal.

The ST model computed new stop levels for both the CAC40 and the EuroStoxx50.

Short Term Trading Book:

- SPX: short at 1792.26 (stop @ 1827, 3pts above the ST model to take into account bid/ask spread)

- NDX: stopped

- CAC: short at 4272.14 (stop @ 4299, 5pts above the ST model to take into account bid/ask spread)

- DAX: stopped

- EStoxx: short at 3027.17 (stop @ 3040, 5pts above the ST model to take into account bid/ask spread)

Medium Term Trading Book:

- No more medium term position at this stage.

Out of model position: (hedge against a blow off rally like in 2000)

- 1 call NDX January 2014 strike 3700 @ 5.06

The Sigma Whole Market Index slightly declined on Tuesday. So, the possible double top we identified on Monday remains valid. We would be surprised that this bull run ends on a 'clean double top' without a crazy asymptotic move, but a consolidation before the 'crazy move' is possible. We could consolidate until next Fed meeting and then rally.

The negative divergence between the Sigma Smart Money Index and the Sigma Whole Market Index remains well in place.

Looking at the CAC40 and the Eurostoxx50, the open gap at 4050 (on the CAC40) and the horizontal support around 2875 (on the Eurostoxx50) are the next obvious target if we break Friday's low.

There is no change in our indicators. The Sigma Trend Index remains in positive territory and other indicators are neutral (at '3').

There is no change in our trading book.

Short Term Trading Book:

- SPX: short at 1792.26 (stop @ 1827, 3pts above the ST model to take into account bid/ask spread)

- NDX: stopped

- CAC: short at 4272.14 (stop @ 4319, 5pts above the ST model to take into account bid/ask spread)

- DAX: stopped

- EStoxx: short at 3027.17 (stop @ 3055, 5pts above the ST model to take into account bid/ask spread)

Medium Term Trading Book:

- No more medium term position at this stage.

Out of model position:

- 1 call NDX January 2014 strike 3700 @ 5.06

Following payrolls data, the market gaped at market open and rally for the whole day. (and closed near session's high). This is exactly in line with the "euphoria" scenario which is building up day after day in this market:  5 days for a decline of less than 1.5%, erased in one big up day.

It seems more and more possible that we will get an asymptotic move in order to end this bull run. This is why we bought a call option on the NDX (out of model position).

In Europe the situation is rather different because recent consolidation was a real one: the market lost roughty 5%. Now, we will probably get a rebound but it is difficult to say (at this stage) if it will be a rebound in a downtrend or if the correction is over and we are ready for new highs: both scenario are valid.

Looking at our indicators, the Sigma Trend Index jumped back in positive territory. Friday's move was impulsive as mentioned by the Swing at '4'.

The ST model computed new stop levels on both the CAC and the Eurostoxx:

Short Term Trading Book:

- SPX: short at 1792.26 (stop @ 1827, 3pts above the ST model to take into account bid/ask spread)

- NDX: stopped

- CAC: short at 4272.14 (stop @ 4319, 5pts above the ST model to take into account bid/ask spread)

- DAX: stopped

- EStoxx: short at 3027.17 (stop @ 3055, 5pts above the ST model to take into account bid/ask spread)

Medium Term Trading Book:

- No more medium term position at this stage.

Out of model position:

- 1 call NDX January 2014 strike 3700 @ 5.06