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The "W" Pattern Is Playing Out, So Far

The consensus of traders-for more than a month--is that the most likely path for stocks through the summer was a "W" pattern-up and down, but ultimately in a range.

That "W" pattern is playing out in stocks as well as economic news, where we get days like today-durable goodsbetter than expected, new home sales worse.

For the last couple days, we have seen the upswing part of that "W", as traders have taken advantage of notable drops in commodity and commodity stocks (20 percent in some cases) to snap up these names.

Big names have seen nice gains since bottoming Monday--Freeport McMoran up 10 percent, Alcoa up 5 percent, Massey Energy up 9 percent, AK Steel up 12 percent.

This is a good sign, reaffirming the bulls' assertion that there are additional buyers out there once stocks dropped to more attractive levels, though still well above the March lows.

This does not negate the bear position, however. A smaller percentage of traders--perhaps one fourth--believes consumers will not be able to appreciably move the economy forward for some time, and when that becomes apparent stocks will drift lower, bottoming in September or October and challenging the March lows.

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