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March 17, 2009

Immutable Rise

Yesterday's rally failure certainly looked inviting to bears, didn't it? Unfortunately, bear with their paws in the beehive got stingers instead of honey as the market continued its immutable rise with another 3% gain. It certainly feels like the market has turned a significant corner, but the change won't be confirmed technically until we crack SPX 805.

stock index chart

In other words, we could still turn and test or break the bottom from here, but unless the conditions outlined in yesterday's post are met, I won't be taking any short-term trades... long or short.

stock indicator graph

If we are still in bear mode, price will have to turn down immediately. If the major counter-trend wave has begun, the CPC is free to become more bullish. We still saw no selling-into-strength on the spyders today, so I have my doubts about the bear case. Still, a consolidation of the gains would not be the least bit surprising at this juncture.

index chart

If this rally is to blossom into something larger, it will have to keep the bears sticking their hands in the beehive. What better way to draw them in than a quick snap back?

mcclellan oscillator

As mentioned yesterday, a quick retreat to SPX 730 in conjunction with some buying-on-weakness data would set us up nicely for a long play into the SPX 805 pivot. Without the BoW data, I would probably let it go, as I still think there is the potential for a bottom test.

If commodities are going to lead equities out of the doldrums, at least temporarily, then we should heed their call. Did anyone notice copper broke higher out of its consolidation?

copper chart

oil chart

If we are in the major corrective rally of this bear market, I anticipate it will last longer and go higher than generally expected. Stock prices have been falling for 18 months. Such a bear wave will not get corrected in only a few weeks. Given these parameters, I would be much more confident in the long side if we saw a successful test of the low. For now, the path remains ambiguous enough to keep me out of any large directional bets.


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