Short Term Stuff

In this morning's opener I outlined why this move may not be done in the intermediate term. I now would like to address why, even if we do go higher, we really should get a pullback first. Markets rarely go anywhere in a straight line and there are usually corrections within larger moves.  From a price, time and sentiment perspective there are certainly reasons to expect a pullback soon.

This morning's S&P 500 futures were 100 points higher than the lows seen a few weeks back and there have not been any real pullbacks the entire way up. From a time perspective the market has been rallying for the better part of over three weeks, which is a long time to go without a pullback. Typically markets show signs of exhaustion after two weeks. We have seen bouts of heavy call buying in the past few days and individual investors are as bullish as they have been in years.All these factors argue for some sort of pullback. A break over 1130 might be necessary to get the last holdouts back in the pool but its difficult to see much upside after that.

Even if the market does manage to rally a few more days, the end of the month will see huge secondaries from both Petrobras and Deutsche Bank, amounting to over $40 billion. If the exhaustion does not get to the market first, I suspect the supply will.

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