Bears get crushed...yet again

The rydex clowns along with all the perma bears out there that were so eager to short any bounce off of last weeks lows got their asses handed to them...again. I suspect all this is going to do is create more anger, more skepticism and more hatred of this rally.

Is there anything I didn't like about today's rally? Well, we started with a big gap again and the equity put/call ratio was quite low today....but a low reading is justified to a degree given today's strength. All in all, market action was quite good. And by the way, most of the time there's always something not to like about a rally. And on the downside it works the same. These are the "hooks" I've mentioned before that try to keep you from riding the trend properly. For example, since April bears have been complaining about the low volume of this rally. This gave them false assurance that the rally was doomed and so they shorted at will. I warned here back then that I heard the same excuse being used by bears in the summer of 2003.

When it comes to the broad markets I have never found volume to indicate anything meaningful except for an indicator of a panic bottom whereby you typically see a volume surge. Volume works much better as an indicator of fear or greed for individual stocks or sector ETFS - which tend to see spikes at ST tops and bottoms.

Markets are now quite ST overbought so let's see what happens here. When the market broke out of the July bottom there was a big buying thrust that rendered the market very ST overbought just as it is now. What ended up happening was that the market still found a way to grind higher in the following days while working off that overbought condition. You don't often see that sort of thing happen but it happens. It would not be bullish if the market gives back a lot of today's gains tomorrow. If the market gives up about half of today's gains in the next day or 2 be on high alert for a complete reversal of today's gains. A mild pullback or flattish day would be what the bulls should want to see here on any downside move. The market should not be giving convenient entry points for anyone who missed the boat.

Bulls are now a stone throws away from making a new 52 week high. If you've been riding the bull train as of late congrats...but don't get cocky. Keep your game tight.