DJIM #12 2010

Whether it’s Greece, China or even Health Care passing worries…What's needed for this market, is a healthy dosage of skepticism.  Any excuse will do!.  Yup, before we can cheer for this market to move higher, we first need this market to come down or consolidate a bit.  This sounds familiar, doesn't it?  Every couple of months or so, market seems to be in a very complacent mode and people forget why this market is going up at first place.

Well, the action that was displayed during the last couple of days the past week showed signs of tiredness.  We discussed internal signals of resistance at 1165 and by Friday the markets ‘blinkers’  came off as Greece worries surprisingly to us not mattering in Thursday's action to the market, geared up on Friday as the catalyst for USD ralling,  pushing SPX to a intraday low of 1155.

It does look like this market is a little "toppy" short term.  As we have been saying in the past few days, a pullback from here is more healthy than if the market continues grinds up from here.  Plays on our list are becoming extremely difficult to enter these days.  It doesn't mean that we don't like our plays anymore, and it's just that we'd prefer to trade them at a lower level. So, before the next earning season starts, lets shake out some fast money and build a stronger base somewhere.  Let's give some of our best plays some breathing room before they get priced into even the best expectation for next quarter.  If this economy is on a slow pace to recover, then we ought to treat this market in a similar way. There's no doubt that some companies are delivering some great results in this type of environment, but we also don't want to forget what happened during the last cycle.  Things can get too exciting too fast and we definitely need to curb our enthusiasm.  So, lets bring out some skepticism so this market can behave in a healthier way.

As far as technical goes, we don't expect much of a support at SPX 1150 as it was never tested recently after we broke through it.  We do expect some meaningful support in the mid 1120s as it's also the 50 MA there.  Anything in between is fair game to us and it'll take more than a few days to settle if the pullback does occur before window dressing possibilities.  In the meantime, at DJIM, we are treading the water carefully and keeping our trades on a short leash and/or away from high beta stocks/ sectors.  Until this market decides how to digest the latest move, we are keeping minimal exposure to this market.