Monday, September 7, 2009

Stocks Headed Higher?

Happy Labor Day to all. Hope the grills are roaring and the ski boats purring.

Wall St. returns to "work" tomorrow after the typical month vacation. I am not very hopeful that sanity will return with it. Friday was very bad for the bears. I pounded on three levels last week. 975ish, 992, and 1015. Why these technical levels? Because outside just a few stocks where maybe the fundamentals are being looked at, that is all that seems to matter. Anyway, sure enough, we bounced off 992 twice. Complete failure to even test 975 and on a day where Wall St. was deader than a prehistoric dinosaur, the computers or couple of investors managed to push the indexes to finish above 1015 at 1016. Why does that level matter? I honestly have no idea. I have never understood why technicals at times matter but I know they do. On a weekly closing basis we did not close below 1015 and the chart technicians will consider that bullish. Don't think traders didn't know this. On Friday it was ridiculous. Nobody was around with volume non existant especially in the futures but you had two burst of volume. One at 11:00 which is where most of the day's advance occurred to get the S&P 500 to 1013 and then it went dead again trading at a very tight range. The second burst of volume occurred at 2:55 (central time) which pushed the futures above 1015. Classic control play by someone trading the markets.

There are other things working against the bears. China is now up 5 days in a row, the Baltic Dry Index bottomed on August 25th, and the dollar is once again sliding.

If we have reached the top, no one says it will be easy. It can fool alot of people bouncing between 1000 and 1040 before finally breaking down. On the flip side, we could very easily be headed for 1100 if we haven't reached our top. Ideally, if we have reached a top we will sell off hard at the open tomorrow (maybe open a few points higher first). Honestly, I am not that confident that the markets will do that. In the short term it all seems fairly bullish to me and I would say from a probability perspective it seems like we will make new highs. Unfortunately that probability scenario in my mind is close to 50 to 50 (it leans slightly bullish) so hard to make a bet on.

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