Stubborn

In market sense this stubborn may look as a positive,  but in reality after a 25% push in less than a month a healthy pullback of 7-10% is necessary in many eyes to go forward.     The premise at DJIM for about a month now, is that an underlying bid  comes into play on most sell offs,  including the same today after a 2 day pullback going into todays trade....  "The 'bid' should be there tomorrow to keep the steep rally in tact,  it will probably be somewhere between overnight lows on SPX cash and 815 during the day.     Simply,  we could just reverse from overnight lows if they come near 800 and go straight up into the trading day".     Despite a hiccup following the ‘FOMC minutes?”,  it still looks like a ‘straight’ uptrend from early premkt into the close on a SPX chart.     Now, we’ll see if the “first trend change this week should be a pretty good one.” comes to fruition tomorrow.     So far, so good, as it’s been about 25 SPX pts.  

You see a pullback in these improving conditions will make shorts cover, sure more gains will make them cover as well,  but shorts don’t think that way after 25% gains and will wait for a pullback.    If you go by historical evidence this pullback should come.     A healthy one is good for both sides,  it allows the shorts to cover at a better price and a door for real money to enter.    Institutions (whales) are not going to get in on the market with sidelined money after 25% gains, you’d think!.    So, this is turning into a puzzle and could even be frustrating to many a Bull.   

So, how may this be different???.   We have run out of catalysts from the gov’t many a Bear will point out , but what might be the current silver lining until stress test results or private equity deals for a financial or two, is “Earnings season’ surprising.     A big positive is we’ve seen no  "blow ups"  in pre announcements so far from any noteworthy company/ sector.    We have a good chance the majority of banks- brokers reports being decent, but you can see from the action this week many are cautious with this sector into next week.    Another we saw today as all the stocks noted in Journal reporting from AA MOS  to JNPR  had more 'decent than bad' calls and all finished GREEN.    Let's add all the consumers earnings today from BBBY  to FDO  to the mix!.

Why the price action?.   Mostly shorts are seeing these reports are not going to send these stocks sharply lower and are forced to just give up and cover.   We will have to give these more than a day to see if real money comes into buy,  you can't tell a day into it as it could be a squeeze lasting a few hours or days.

Watch  for opp's heading forward for big 1st day gains on a report due to shorts covering, even on just decent reports like these above.   A big beat report could be twice as hard!!

Bottom line...with light volumes this week we can easily move higher,  we were stuck in 815 to 825 range today.  Let`s bust thru' 825 and close the week off with a good tone into what will probably be a very decisive upcoming week with C GS GS INTC GOOG  and a slew of other reports.   Right now, we are just going with the flow into tomorrow and will wait for the eggs to hatch next week.   Many will be sunny side up, but expect a few scrambled ones in the mix.

Happy Holidays!