Tuesday, April 6, 2010

3 Bears Left and Counting.


Neither the Fed minutes, rising interest rates, or anything else is going to stop the bulls from SPX 1,200 and INDU 11,000. Some gurus are suggesting even 1225 on SPX is not out of the question. I don’t chase price, but I do setup for reversals. It’s all a matter of following the herding instinct or going down that path less traveled… and right now that path is cluttered with overgrowth since there are probably only 3 bears left on the planet.

The Dow may be 31 points away from 11,000, but it is also 3,225 points away from its all-time high. No one can deny that the Dow, indeed all the indices, have made a hell of a run off the lows of March 2009, but be real, there is also no denying that there is still a long, long way to go before one we can feel good about crossing these round number thresholds.

Day trading the long side is one thing, positioning for extended long swings is something else… for that I need a correction. At these heights going long means smaller size no matter what I see in the charts. Look at volume on the SPY today, half what it’s been the last 3 months. Where’s the conviction of bullishness? It’s there, but only for a few… so far.

Every major index has developed a rising wedge pattern and nearing a channel line which are the next patterns it has to destroy… spx, dji, iwm, spy, below is the SPX example:

Tomorrow before the open FDO, GBX, MON, and MSM are scheduled to report. Watch closely how these stocks react to the announcements, especially MON, for clues as to how the market will handle earnings starting next week with AA. If they sell off on reasonably good reports then they were overpriced to begin with.