Do you remember during the great bear market of late 2007-March 2009, when the bears would arrogantly shoot down any argument by the Larry Kudlow-types on those rare, oversold days when we squeezed 30-40 handles or more higher on the $SPX? Do you remember what they would say? They argued, these types of huge rallies do not occur in bull markets. They are merely exuberant but short lived dead cat bounces. New lows are coming! In a true bull market, stocks climb steadily higher at a slower but more lasting pace.
They were, of course, 100% correct. Indeed, after all of those violent bear market rallies, we quickly collapsed and made new lows. Now, however, after we have reclaimed all of the major moving averages and have sustained higher highs and higher lows broadly since March 2009, those same bears now argue that we are unconvincingly drifting higher by a mere 5-10 $SPX handles a day. Yet, that kind of steady climb higher was how they defined a bull market a mere year ago! So, you see, the bears will always be unhappy with the tape, except of course for those times when we crater every day.
My point is this: we continue to see bull market action. There are no signs of an exuberant intermediate or long term top AT ALL. Many charts have had time to develop constructive, bullish formations and are working their way higher. While it is true that we do not have impressive–or even good– broad market volume, I continue to argue that is what happens when you have a crash like we did in 2008, as ferocious as it was in a short amount of time. It leaves a vacuum that allows us to drift higher unsupported by volume because the sellers already panicked and capitulated with such force like we have not seen in a generation at least.
With respect to today’s action, the $SPX climbed 0.79% to finish at 1187. The chart above shows that, although we remain on the overbought side of things, the Full Stochastics and RSI indicate we can get more overbought in the short term. Above all else, we made fresh multi quarter highs without any signs of a blow off top. Fighting the tape is still not advised, although many still insist on doing that. As the chart below shows, we have now NEGATED the outside reversal day from March 25th, by way of closing at fresh multi quarter highs after the bears had almost two weeks to try and take us down.
