Just a matter of when...

It's not easy to sing a Bull song when every effort to rally the market has failed as of late.  What looked like a potential short term turning point from yesterday's late day rally turned into nothing, but another  failed short covering exercise as the CDS euro trouble noted yesterday was the focus.   Greece isn’t becoming another Atlantis,  tomorrow will probably be better news flow and the next it will be bad again.  These day to day changes will go on and on, in reality,  this is just another Dubai type isolated issue.  We posted before the SOTU address saying don’t get “too enthusiastic “ about Wednesday late rally as it was just in anticipation, followed up saying any uptick is for ‘profit takers’ and normalcy would only occur with a breach/ close of 1105.  This premise still remains tonight and will for awhile.

Perhaps,  this has something to do with the end of January selling to protect profits.   At least,  it has turned into that!.   A normal course we see end of a month a few times a year.  Still, the way it's going, there really won't be much profit left to protect.  Honestly, at this point, we don't know that many people that have any "Long" profit left.  It is probably a blessing we are finished the peak week of SP earnings,  this is resembling the end of month selling at earnings we just witnessed in October and could be a catalyst  to a bounce.    See your daily SPX chart or below on site of similar selling action in October and November reversal.  This is becoming reckless (while investor issues are slowly resolved in it‘s favor), which is familiar to HF selling.

We try to look for things that still make sense as a bull.  Right now, we just have to say the market sentiment isn't on the bulls' side.   As far as short term goes, this is how we see it.   Does that mean we should give it up and go full short or simply leave this market alone?  Not really!   The short term pressure may very well be the kind of break this market needs.  We know, it's kind of silly to talk about bullish aspect of things when market has been beaten down day after day.   Trust us,  it's not easy trying to be rational in this market environment.   What we believe, at this point, is that the market has shown us enough of an improvement over the last six months that we'll get some strong bids sooner than later.    Remember, this market isn't in a free falling mode as far as the Economy or Corporate profit is concerned.  What's really "disappointing" the folks is that the Economy recovery isn't progressing in warp speed.   This is basically very natural because we all want to see companies growth at 20% every quarter and our GDP kicking in at 5%+ annually.    However, this is pipedream and it's basically hitting people's mind that we are REALLY entering a grindy kind of a Economic recovery.   To us, this is simply fine because we really wanted to see this Economy recovery to take as long as it can.  Why?  We really don't want the Economic bull cycle to peak within another year or two and start the down hill soon enough with policy tightening hitting here.  Geez, if US shows 10% GDP like China, we’d probably see SPX666 instead of 1666.   This is why we are hoping majority of the money managers in America see things the same way as we do.

We have talked much about the unfriendly politicial environment to this market lately.  This is not something we can control and we just have to carefully gauge the ongoing development.   If a drastic change in Govt. policy takes place in the future that changes the scope of this market, then we'd definitely rework our strategy around it. It seems Obama packaged something in the budget that stinks all over again.   So far, all of the smoke and noise out there is playing right into sellers' hands to drive this market lower.  This basically brings us to our current view of the market.   There's no doubt that the probability of this market going lower is pretty high while we sit near SPX1080.    We do, at this point, have to be prepared as to where to start picking our buy point if this occurs.   Many stocks have shown that the pace of decline have slowed down, but it doesn't necessarily mean that they'd stop going down.   If SPX drop another few dozen points, if it doesn't bounce early February from these levels, we have to believe that many of the plays on our trading list, big and small, will drop a significant amount as well.   In the short term, we still believe that we are first for a good bounce in early February if we survive now at these levels.