Don't say I didn't warn you

Late Thursday I said look for a retest of the lows i.e. 870ish either Friday or Monday before a surge higher. We got that and now with Intel blowing out their numbers tonight, the market is poised for a large gap up on Wednesday. The head and shoulders pattern bears were salivating over has led to one of those Charlie Brown moments when he runs to kick the football that is being held by Lucy only for her to yank it away at the last moment leaving poor Charlie Brown flattened on his back. The funny thing about it is that Charlie Brown seems to fall for the same trick over and over again. On each attempt he is somehow convinced that this time he will be successful but never once did he ever kick that ball.

I warned right here well in advance that if the market had made an important top in June, don't expect it to be easy to capitalize on the downside because traders and investors have been very quick to turn bearish on only marginal declines. Mr. Market will continue to punish this type of behavior untill enough people give up on the notion that the market is going to crash and restest the lows. Only when enough people fully embrace the notion that the worst is over and there will be no retest or double dip reccession will the market have the potential to drop significantly.

I still believe the market is not in a position to make a run for new highs just yet either, but the longer the market maintains this sideways holding pattern, the more likely it will make a signficant upleg higher latter on because in another few weeks or so, the market will have fully worked off it's IT overbought condition and actually become slightly IT oversold.

After the Goldman Sachs report, this Intel news is now the second bell weather stock in a row to have blown past its expectations. Should you be suprised? I'm not. Here's what I said on May 11th

Analysts overestimated earnings by an average 13 percentage points in each period between the third quarter of 2007 and the end of 2008. Better-than-expected first-quarter results haven’t prompted them to boost forecasts for the rest of 2009. Instead, they’ve ratcheted down predictions as the first global recession since World War II weakened demand.


So, despite the fact that earnings were much better than expected analysts are LOWERING their forecasts. Is this yet again anchoring I see? And the strange thing is that the "adjusting" is going in the opposite direction! Thus, it looks like analysts are doing what I now call "anchoring and negative adjusting" or I suppose you can also call it "anchoring squared"