included in this analysis are updated reasons for being a bull or a bear in this market:
Why Bullish?
1. so far every pullback day, even yesterday's are all very controlled. it does not seem to be a panic sell off at all. its more than anything just a frustration sell off. people taking money off the table because of the huge run from the 400 point day and a well deserved rest for the bullish traders who made money last week. this explains the low volume during the past consolidation week
2. bad news comes almost everyday now and none of it has caused a huge selloff, neither intraday nor on the daily chart. traders and investors must be getting used to the news and have priced it all in before placing their money into the market. these investors seem ready to stay for the longrun.
3. today was up...and if the day holds its gains for another 1.25 hours, we will be closing up off a bounce off the 20 and 50 EMA on the daily S&P chart. very pullish signal for technicians..
4. money is moving into the big caps. moeny into the big caps means that we are having institutional and long term buying. traders pick momentum stocks like commodities and tech. There has been moderate movement in commodities and tech, but mainly the money is in the blue chips...good sign that its institutional buyers adding to mutual funds. i call them the longterm bulls...
5. higher highs and higher lows on the daily chart of SPX...can't deny that short term, this trend is up.
6. bigger intraday moves on the upside than downside. slope of angle favoring the upside to the downside.
Why Bearish?
1. You can't ignore the VIX. We are close, maybe not quite there yet, but i can almost assure you that we will not be making new lows. No way are we gonna go under 18 in a bear market and we definitely are still in a bearish environment overall...just look at the weekly charts and you will know that.
2. Great news have come to the financials with money pumping into C and WM, yet no reaction in the stocks. Financials are still doing poorly. Can there really be a push up without the financials participating? Very unlikely. Look at the past several months and you will see that the financials have only rallied on news...nothing more. without government intervention or catalytic news, they go down or trend sideways. For any push up, there will have to be strong news. Without that, the market will just fall on its own weight, starting with the financials. the longer this consolidation goes, the better it is for shorting financials
3. Lack of follow through by bulls. Bears lack strength but so do bulls. where's the committment?
4. Leaders in recent weeks are from mainly energy and commodities. this is all because of the weak dollar and global demand. they are almost an entirely separate market. Strength in them does not mean that the overall US market is strengthening but quite the contrary. Means that the dollar is weak and people have been putting their money into non-equity investments. This kind of investing cannot lift the indexes in the long run.
Summary
We are definitely in the period of "the calm before the storm"...now...will the storm be hugely bullish or bearish?its still really hard to say. But from the action or lack of action in the market, i am very confident that the next move will be big...options Ex next week and of course we are in earnings season as well...financials report next week...all reasons for speculating huge moves to come...good luck and hang on tight!
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