Thursday, January 13, 2011

Through 1278 SPX....

The market has been gravitating higher slowly but surely, no question.
Over the past many weeks it had set up shop between the gap top low at
1262 and the 1278 as its high. A few tests down at 1262 looked like a
breakdown was finally upon us, but that was not to be. There were many
test back up to 1278, but failed as well, so it became a chess match
between who would make the move first. The bulls pulled off the move
today. It wasn't a shocking move higher as we're barely above 1278.

Slightly less than half a percent above, but we are above, and that
can't be denied by anyone. This opens the door to a move up to the top
of the trend line at 1300 on the S&P 500. That chart is there for your
viewing this evening. It seems as if this market doesn't waste a
point. Although, by no means a guarantee, if the trend line is open to
approximately 1300 on the SPX, it seems as if it will find a way to
make it there, even if it doesn't hold once it does get there.

We started out with a gap up today. That gap was made possible by some
excellent overseas action, first in Asia, and then in Europe,
particularly in Germany. After we gapped up we spent most of the rest
of the day trying higher after a small pullback early on. We closed a
bit off the highs, but nothing to get too worried about. We closed
above the open prints and that's what matters the most. Solid action
in to increasingly overbought conditions. The bears have to be shaking
their heads in disbelief and who can blame them.

Sentiment is now a very real issue for this market. Unfortunately, for
the bulls, all this bullish behavior and action has really juiced up
the average investor. The bulls are ramping in numbers. We now have a
spread of 38.2% more bulls created by 57.3% bulls versus 19.1% bears.
Ouch! That's getting a bit out of control. In addition, we now have
the daily and weekly charts getting well up there on their RSI's. Well
above 70 in many cases. On top of that, we have the NDX monthly chart
at 70 RSI. Red flags abound in terms of overbought and sentiment. In
time, the market will snap down, but as always, you have to stay with
the trend until you get the proper bearish reversal stick.

Anticipating the reversal hasn't worked. It means you will likely get
caught in a play, or so, but how can you not stay long with a trend
that's as powerful as this one! Stay with it until it breaks is the
absolute best advice that I, or anyone else, can give folks. Just
recognize that the risk in this market is no longer high. It is

The market strength is great for this reason. The strength is
everywhere. In many markets that are trending higher you get one or
two sectors out performing. It's rare you get strength across the
board, and it's also bullish because you are getting constant
rotation. If one sector gets overbought it slowly, but gradually,
unwinds its oscillators, but the money will then rotate in to other
places throughout the stock market world. That's the sign of a truly
healthy bull market. It's also not as if just a few stocks are
carrying the day. There is strength within every sector. Stocks are
running up throughout.

The market is very healthy from a technical perspective, but we do
have to deal with what I just discussed above with sentiment. But
again, make no mistake that this is a healthy market. You can call it
frothy, and I wouldn't argue, but that's not what matters. It's about
price action, and the action says things are good, whether it's
appropriate from a fundamental perspective or not. Don't get emotional
with what's taking place. That's the recipe for a rough time trading.

The bulls are gathering amazing strength at S&P 500 1257/1262. There
is the top of the gap at 1262. There is the bottom of the gap at 1257.
Then there is the 20-day exponential moving average at 1260. That type
of confluence of support will make it very difficult for the bears to
get much more than a 2% pullback at least initially. It'll take a lot
of time and work to get this market to trade below 1257. If the bears
can do that then they can work on getting things lower, but because
this bull market is well above the 50-day exponential moving average,
and because you have so many gap ups in the pattern, nothing will be
easy for the bears, even if they can get this market below S&P 500

With the news, so far, coming in very good in terms of the economic
reports, the bears won't have an easy time getting anything

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