The Believers Versus the Heathens

______________________________________

We are seeing some of the sharpest claws that the bears have been able to muster thus far in 2012 this morning. The morning gap down has awakened traders who had been fighting to no end to see some type of reversion to mean in recent weeks. Seeing that we have not had a down 1% day this year, now looks to be as good a chance as any for the bears to accomplish that feat. Indeed, breadth is strongly red, and I would be surprised if the dip-buyers were able to pull off another massive intraday reversal.

What is more important to me, as a swing trader, is the larger picture. We are currently about 2.5% off the 1378 highs on the S&P 500. As I have discussed in prior blog posts here and inside 12631, a 3-5% correction can come at any time and still be wholly within the context of a bull trend. In addition, the Russell 2000 small cap-dominated index is at its rising 50 day moving average. The 50 day is a widely-watched reference point and, especially on the first touch in a trending market, is an area where the institutional believers in this rally are likely to put up a strong fight. Whether we close one or two ticks above or below it is not particularly important to me. Instead, I am looking at this general area as the primetime battleground, where the true believers in the rally fight it out with the heathens who have no faith.

Other than that, I am probably going to reevaluate my holdings this morning and look at cutting loose of the laggards. The bears have been wrong enough for long enough, and no team goes undefeated throughout any stock market season (trend). So, I am apt to let them have their fun today. After all, they have waited long enough for today.

http://www.youtube.com/watch?v=swUXCj0MyT8