Bears need to admit...this rally although long in tooth has acted differently than the other bear rallies

I mentioned in a previous post that the relentlessness of this rally reminds me of the March 2003 rally. During that rally, indicators hit extreme overbought and stayed there for 3 straight months. The difference between this rally and the March 20003 rally technically is that this rally is not as clean because there's a lot of gaps in the charts at lower levels which tells me that one day we will see those lows again.... but it could be a while before that happens because there are signs that the economy is stabilizing. Bears are expecting that when this rally fizzles it will be back to the lows in no time....I have my doubts. It will probably not happen until sometime in the late summer or the fall and by that time I suspect most bears will have been cleaned out.

The tone from the typical retail trader is still one of skepticism. Ask around you who believes in this rally. Although some are conceding that the market can go higher still, everyone seems to believe that the market will go back to the lows in short order once this rally is over. I don't think so. The economy is showing signs of life for the first time since this mess began. Everyone agrees that housing needs to stabilize before we can recover and it's showing signs that it is. Housing affordability is also the best it’s been in 30+ years. Also, a very respected source for predicting turns in the economy is the Economic Cycle Research Institute. They were bang on during the last recession and this one as well. Their leading indicator has been steadily rising forecasting an improvement in US economic activity. Could it be just a hiccup? Maybe.... but this hiccup could last for last for several months. Remember, the 2003-2007 was essentially one giant economic dead cat bounce. This one could perhaps be 6-12 months.... who knows.... the bottom line is that if the economy gains momentum; bears would then be fighting an uphill battle. At the very least I believe these "green shoots" of economic stability warrant a test of the market's 200 day moving average which has not happened in this bear market. Currently the SPX 200 day moving average stands at 982. I doubt we will go there on this current run. After this rally cools off it will probably take a month to digest the gains if my thesis is correct. By then the 200 DMA will have dropped.

Ok.... now back to the short-term prospects of the market. A lot of people are saying the market is in a rising wedge pattern that will end abruptly at any day now. Its looks more like to me a parabolic type move that will end off with a "blow-off" move to the upside to around the 900-930 level. I suspect this happens in the next 1-2 weeks. I keep raising my upside targets due to the way the market is behaving.... not just because it keeps going up but by the way it goes up...inch by inch. This tells me there's a lot of top picking going on and not enough panic buying.

Once this move is over there will probably be a quick violent sell-off initially. If the bulls have any mettle the sell-off should be contained at around the 790-800 level and markets consolidate for a while. If not then a retest of the lows will probably occur sooner than I think. We'll see how this all plays out. My game plan is always a work in progress. I'm thinking quite far ahead and I'm sure I will be making adjustments to my outlook as things progress.