Once again, for the hundredth time I'm seeing the burned bag holding permabear community foaming at the mouth calling for the end of the rally as a result of this reversal day. I have documented so many times these past several months about how such reversal days tend to end up being bear traps. And despite the amount of times these losers have been getting their skulls bashed in top picking they have the audacity to show hubris like this when the market is down 1 point after just making fresh 18 month highs. It's a sickness I tell you and there's only 1 cure...bankruptcy. Now look, I mentioned the other day not to be piggish here on the long side but I gotta tell you, this behavior I'm seeing from the bag holders tells me that there is still more pain in store for them before this rally from February 5th is over. We could dip a bit first to sucker in these guys some more before they take it up the kiester again.
I'm getting some mixed signals here. While rydex data is signaling excessive bullishness, AAII sentiment is not and is showing very odd behavior. 2 weeks ago when the market was lower AAII sentiment showed about a 1.8 ratio of bulls vs. bears which is just under the cautionary 2:1 ratio but then the following week even as the market was higher this ratio dropped to 1.2 and now with the market higher still, it came in at .91 meaning bears are slightly outnumbering bulls! This dumb money indicator is showing skepticism in the face of 18 month highs. This can mean 1 of 2 things. 1)the market will simply march higher from here until bulls substantially outnumber bears or 2) downside will be limited to a shallow pullback because that's probably all it's going to take to render the ratio to reach 2:1 of bears over bulls which has signaled strong buy signals in the past.
Next week we get payroll data and expectations are for a solid month of job gains! Wow! Who would ever think that's possible right? We've truly come full circle from 10 years ago. I read somewhere today that expectations are for about 125K new jobs or something like that. Could the market perhaps be sensing an even stronger payroll number....like 200K? When the market makes a very strong and persistent move without any apparent reason quite often it's sensing something significant that will be made obvious later on. There's no doubt top pickers getting squeezed ads fuel to the fire but I think there's more to this. We'll just see what happens in a week from now.
Bottom line: I'm suspicious of today's reversal. Although the market is extended here and a little bit of downside follow through could happen I suspect this is yet another bear trap which will eventually crush every last bear bag holder from a few weeks back. It's piggish to press the long side here in the hopes of this playing out but I got to tell you, I wouldn't short this market just yet for a trade unless your holding period is 1 day or less.
I'm going to be very busy with moving and so I may not be making any posts for a while. I'll try to squeeze in a couple more if I have time and energy.
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