Eventually today's gain will be erased but there could be more upside first...be on guard

I have been stating here for a while that the market has been climbing a wall of worry. I have pointed out many times how it gets no respect, how people keep calling it a bullshit rally, manipulation, fake or whatever. There are still plenty of skeptics but I'm starting to notice some signs of froth. We are starting to see morning strength instead of weakness which is a sign that the emotional money is getting bullish but mind you...only this week have we started to see this. Also and more importantly, the smart money which acts in the last half hour of the day has been bearish this week...again, only for a week has this occurred. Another warning sign is when the ratio of trading volume on the NASDAQ vs. the NYSE spikes which indicates an exuberance for "risky" stocks. This is occurring right now, but it's still not quite at extreme levels.

We also have an unfilled gap after today's action and the post fed hangover tendency of the market. Here's a great chart which shows that there's a very high probability that the gains we have seen today will get wiped out in short order.



However before you bet the farm short, understand that we could very well see some sort of an upside blow off panic buying type move to about S&P 900 or so first before heading down because today's action did not result in mass capitulation from bears given that the market closed under the 875. It did break 880 intraday but only briefly and because we closed at 875 it gave a lot of bag holding bears a bit of relief and hope. It may very well be the case that Mr. Market really turns the screws on the bears until they finally just can't take it anymore and capitulate and after that point head down.

I don't plan on making any trades because I don't see a good risk/reward set up. Perhaps tommorow will offer an opportunity intra day.