By trading sideways for the last few days, the market has worked off a lot of the extreme ST oversold condition I mentioned a few days back. This could very well be the “pullback” that everyone was expecting....not quite as deep as everyone thought it would be isn't it? Maybe the pullback is still to come but the market now has the green light to go ahead and make news highs…in other words, we won’t see another ST overbought condition until the market goes up to about 1050 or more.
Market action suggests to me that it wants to go higher because with the market having been so overbought bears had every opportunity to knock it down hard, but instead, they did what that kid did in American Pie when he had that hottie naked in his room....blew their load and got nothing to show for.
What I'm noticing is that bearish signals from the indicators I follow have had much less potency. This is classic bull market behavior. For instance, I warned here around June 10 of a top and we got one but the correction that followed was rather modest and the market went on to make higher highs shortly after. Similar bearish signals occurred in 2007 and 2008 which led to nasty down legs.
The bulls have the bears by the balls right here. When the market got extremely overbought a couple days ago, the bears had their chance to take the market down and they blew it big time. Now they have paved the way for the bulls to go for the jugular and take the SPX to new highs. I still see plenty of bears to squeeze to help fuel such a move. I also noticed tonight the NASDAQ/NYSE volume ratio was quite a low 1.29 today which has ST bullish implications.
Bottom line: The road has been cleared now for the bulls to make another charge. I'm not sure if it happens tomorrow but it's looking like they are going to bust through that SPX 1000 gate soon. Even a move back to 975 wouldn't put this thesis in jeoproday. I move towards 960 would though.
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