Futures tonight are down about 1.5% what could be a knee jerk reaction to the swine flu outbreak. I doubt this is going to do any serious harm to this rally aside from a day or 2 of weakness. In 2003 the outbreak of SARS did little to derail the bull run.
The market is a little bit ST overbought and so I was expecting Monday to be a choppy downside day regardless of this news. I will be watching carefully to see how traders react to any downside tomorrow morning. If there is too much eagerness to buy the dip, then the weakness could accelerate.
A lot of bears are pointing out the high levels of insider selling that has occurred recently which therefore means the "smart money" doesn't believe in the rally. Maybe that's true...but keep in mind the fact that insiders have been dead wrong in 2007 and 2008 when they were buying in "record amounts" at much higher prices than today's. In fact I remember when the market dropped sharply in July 2007 insider buying spiked to its highest level in 14 years. Clearly, that must have been a great time to buy right? Well, only if your time horizon was 2 months. If anything, insiders may very well be unloading because they too got burned and look at the rally as an opportunity to sell and cut loses. This is how the typical retail investor has been reacting to this rally for the most part! Ok...I'm probably taking this a little too far. A big spike in insider selling is clearly not bullish...these guys have been good in the long term with their timing, but what I'm trying to say is that this time around the big insider selling is not necessarily bearish because insiders have been such big buyers for the past 2 years any time the market showed weakness and now they are simply unloading some of their bigger than normal positions on this rally.
Overall I still don't think there hasn't been enough "belief" in this rally for it to be over and market action such as the smart money/dumb money indicator suggest we could see a lot more gains ahead. This doesn't guarantee things must go higher...there's no such guarantees in the market. It's simply a matter of playing the odds.
This swine flu news could throw the bears a bone here for a day or 2 but I doubt this will be a sustainable downside catalyst. In the past few weeks we have quite often seen the market have a down day on Monday only to recover on "turnaround Tuesday". This is begining to get too obvious and wounded bears might not be willing to press shorts on Tuesday given how badly burned they have been doing this...that's why Tuesday could actually end up being another down day. I'm looking a bit too far ahead here because we don't know how Monday will turn out to be yet...
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