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MARKET WRAP UP 02/08/11

The resilience of this market cannot be denied. Below, I have outlined what I believe to be the three best bullish arguments for continued strength, versus the three best bearish charts that would support the thesis that an intermediate-term top is imminent.

BULLISH

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BEARISH

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MARKET WRAP UP 02/07/11

The bulls opened today’s session with a rather vigorous morning push, before the action dulled down a bit into the closing bell. With the S&P 500 finishing up 0.62% to 1319, the broad market is converting even the most ardent of perma-bears these days. While some of the commodities saw notable intraday reversals–namely copper–the regional banks led us higher. Moreover, AAPL and GS gave the bulls plenty of ammunition to continue buying even the most of extended charts in various corners of the market.

Going forward, the crucial issue hinges on how much longer the broad market can continue to move higher despite glaring underlying divergences, coupled with a lack of proliferation of high probability long setups.

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MARKET WRAP UP 02/02/11

The market is trying to prove its resilience once again, despite a multitude of reasons to be cautious here. Here are some of them:

1. While the S&P 500 is right at 52 week highs, the transportation stocks (IYT or DJT) are slicing down through their respective 50 day moving average.
2. The technology and small cap stocks (QQQQ and IWM) failed to “confirm” the S&P’s fresh 52 week high by printing one of their one.
3. FCX GLD and SLV are sporting weak daily charts, struggling at important price levels after bouncing back up to them.
4. There is a lack of clear leadership. Instead, traders are simply scrambling from pocket to pocket of perceived momentum.
5. Sentiment is becoming a bit too complacent for my taste. The non-financial media is espousing the idea that all is well with the market because the Dow broke above 12,000 and the S&P 1300.

Hence, evaluating one’s own threshold for risk is key at times like this. The above evidence is not enough to become aggressively short in the face of a seemingly inevitable melt-up. However, is it a good reason to tighten up.

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MARKET WRAP UP 02/01/11

The dip-buyers who stepped in last Friday enjoyed a spectacular sequel to yesterday’s bounce, as the S&P 500 screamed higher to finish up 1.67% to 1307. The materials and technology names led us higher, as breadth was impressive overall, despite modest volume. Regardless of whether today was some sort of first day of the month phenomenon, the bulls were able to clearly print a fresh 52 week high on the S&P.

Nonetheless, the small caps, transportation stocks, emerging markets, and even Nasdaq Composite all failed to confirm the new high. Indeed, the trannies and emerging markets continue to sport technically damaged charts. In the coming days, these divergences are sure to come to forefront as they are likely to be resolved one way or the other.

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[youtube:http://www.youtube.com/watch?v=fmA1wpAsnxI 550 412]

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MARKET WRAP UP 01/26/11

The round numbers of 12,000 on the Dow Jones Industrial Average and 1300 on the S&P 500 seemed to almost steal the show today from the State of the Union Address last night, not to mention The Fed Announcement today. One the surface, the S&P finished up 0.42% to 1296, but some of the underlying bounces in the small cap and transportation stocks, as well as the beaten down metals/materials names, were quite impressive. Moreover, it is becoming almost laughable at how inept and uncool the bears have truly been in terms of their lack of ability to sustain even minor technical damage to the senior indices.

Looking ahead, the real issue is whether the bounces we saw today in some of the underlying areas of the market–where the bears have, in fact, won a few battles over the past week or so–will continue higher for another rally that will force bears and underinvested bulls to throw in the towel and chase stocks up to fresh highs. Alternatively, these bounces could ultimately be short-lived relief rallies, setting up a bit deeper of a correction. As usual. my analysis takes me one step beyong the indices and sectors, and focuses on the quality–or lack thereof–of individual setups. In this case, although some key areas of support held today, the heavy selling volume that we saw over the past week or two in many names still has me cautious. However, the difference between a cautious stance versus a downright bearish one cannot be stressed enough. Indeed, falling victim to a heinous short squeeze is much different than electing to not risk dollars for pennies, even if the pennies may be briefly for the taking.

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