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Alhough the major indices are only slightly up right now, I am seeing some energetic action underneath the surface, even as plenty of traders focus on their infatuation with Apple. In particular, the energy and materials complex are getting a bid. While the easy explanation for commodities rallying is that the Dollar is fading, I think a more thorough analysis reveals that the enegy/material complex had held major support last week, and the XLB especially still has a fairly large confirmed inverse head and shoulders bottom dating back to last year.
In addition, and perhaps of more significance, the transportation stocks have done a terrific job of bouncing back with vigor this morning. Yesterday, I pointed out in my video recap that the bears would likely try to press the losses in the trannies from Wednesday’s session, where they lagged. However, the downside follow-through has once again been rejected, and bears are likely scrambling to latch on to another weak sector.
As the session progresses today, I am looking to see if the bulls pick up even more steam. If so, I suspect there remains plenty of fuel for the upside fire in terms of how many traders are either currently outright positioned for a major top, hedged, or underinvested and forced to chase.
Clearing 1400 on the S&P 500 has not only been short-term resistance this week, but is also a prominent round number that the financial media will be sure to discuss. Here again, if we see a move through that level just above, I expect to see plenty of stops taken out by shorts who had noted that level as a certain max pain area. In other words, if 1400 is breached I expect a swift move higher.
I know thats your gal!