Moo.. That Herd Instinct

I suspect good news from today's Durable Goods and New Home Sales reports will prod the bulls higher still, since this would support talk that the market is underestimating the strength of the recovery. However, a failure to react, if today's reports are "better than expected," I would then expect a sell off. No, I won't be holding my breath on this expectation. However, I will be watching the financials (BKX, XLF, IYF, KBE, RKH) closely for clues.

One argument for a continuing up lift is the month end window dressing. A student mentioned yesterday that those windows must be awfully gaudy by now. That may be, but who's to say how much is enough?

The price chasing money managers already know they're overpaying for stocks. They're buying, among other reasons, so they can point to their portfolios when their directors meet, and say, "See, we own those stocks... like everyone else." Money managers are the herd you keep hearing about. What do we know about herds and herd instinct? They sometimes run off a cliff, which is my expectation of this stampede... I just don't know how much land lies ahead of them, but neither do they.

While the market has lost momentum over the last few days selling pressure remains at bay with the SPX essentially forming a range (1022/1021 to 1036/1037) most of last three sessions. Support under the range floor if the weakening momentum begins to roll over on a short term basis is at 1018 (early Aug high/breakout point) and 1013/1012. Resistance above the high is in the 1042/1044 area (Fib extension targets/congest/Oct reaction high).