Destined To Fail

I was expecting the bulls to protect 1150 but was not expecting this type of strength. I believe this rally will fail and that 1150 will be tested again this week. I am debating whether to raise my short positions. I continue to have a small net short position.

4 comments:

PJ said...

The government won't allow the market to close down the day after health reform was passed. (No headlines: "Stocks sink on health bill.")

But I doubt they'll be holding up the market much longer. When does Obama sign the damn thing anyway?

Onlooker said...

The RSI strength and breadth strength ($NYSI, A/D, new highs) into this peak is impressive and I don't think we get much more than a few percent dip. This market is definitely "strong like bull."

Though I won't say that 1150 is ironclad support here and I do expect some more up and down the rest of the week to work off some near term overbought conditions and bullish sentiment.

After much study of the conditions this weekend (further education that I've needed to do), I don't want to be short in front of this train. A consolidation will precede more upside soon, I do believe.

The only thing making me wary is the bullish sentiment like call buying, though the AAII was very reserved given the recent rally. I really expected more bulls, not less. And the Rydex numbers are almost back to the Jan highs (i.e. bearish for market).

A bit of a mixed picture there, for sure, though overall warranting caution. Maybe an Aug '09 type pullback at most, which was only about 4% on the SPX. That would put us around the 1125 gap area on that big up day with very strong up/down volume. I think that would hold. If 1150 breaks then I think that's where we'll go.

I'm net long right now, with a tiny bit of put protection. And very skeptical of the market longer term, but not ignoring the internal strength that exists right now. Bears will continue to get their heads handed to them for a while, IMO. I've been there and not doing it anymore.

But I'll be quick to flip to bear if the evidence suggests it's warranted.

PJ said...

Onlooker - I think you're picking up pennies in front of an economic bulldozer. When the economy turns down again -- and it's plateauing now -- we'll see that overall credit problems are worse than they were 2 years ago ... and the market will go back down.

Onlooker said...

PJ

Don't misunderstand my here, I'm fully aware of all that and am very bearish overall. Please don't confuse me with a blind bull that believes in the recovery B.S. touted on CNBC, etc. I'd much rather be compared to Tsachy, and hope to have the same success.

I'll be right on the bear wagon (again) when the market tells me to. But right now it's not doing so and everything you've said has been the case for quite a while now.

I'll be watching the market closely to see what it does in the near term and will be buying the dip upon further strength. But I'm keeping a watchful eye and a quick trigger finger. I've got some put protection so don't worry about me. :-]