Well, here we are...if the market drops here we will be have a potential lower high and the bears are going to be licking their chops. Yesterday's action was not good in the sense that once again we just rocketed out of the gate, this time with a large gap up making the action even more unfavorable. Those types of days tend to get retraced in due time. In addition, the equity put call ratio was a very low 0.47. The last 2 times the equity put/call ratio was less than .50 was mid September and late August and in those cases, the market ended up making a short term top shortly after.
Countering the bearish implications of the put/call ratio is the rydex ratio which continues to be in bullish territory despite the big gain yesterday i.e. rydex traders didn't buy into that rally yesterday.
Bottom line: if we could get another whack down in the days ahead it would probably set up for ideal conditions to see the markets make a bullish run right through to the end of the year...but markets don't often do what you feel would be ideal and therefore we could start such a run right now but I don't believe the upside action we've seen is the sustainable type....in fact, the past 2 days on the upside look like the bear market rally type days we saw last year. I will not however, be disrespectful of this upside and so any short side trades I might make will be done carefully and prudently however, due to the mentioned cross-currents I probably won't be doing much trading and/or keeping it on the light side.
The bears wanted a 10% correction and they are just not getting it. So I fell there will ultimately be a top capitulation as these guys come back in and chase the market higher. I would not be surprised to see S&P 1150 at the end of the year.
ReplyDeleteas I mentioned a few times before, a 10% drop during this phase of a bull run would be a dangerous sign for the market. On aveage you don't see such a correction until about 18 months or so after the bottom....all you tend to see is 2-5% corrections which is pretty much what we've seen thus far.
ReplyDelete