A Bullish Love Affair

26 January 2012

To best depict what we are currently experiencing in today's market, with the bullish euphoria that exists, the belief that European woes have passed, and that somehow it's different this time, let me point you to the movie clip below that comes from "Meet Joe Black". Here you have Good 'ole Joe and his lovely lady friend, being swept away by one another in a coffee shop. But like the market bulls, both parties are completely oblivious to what lies around the corner...

Is it any surprise that Mr. Market, Joe comes back as death himself?

All kidding aside, let me point you to the chart below, which is the basis for my belief showing extreme long-term resistance at today's highs. Notice that this is a five-year chart of the S&P and we are at a resistance level that in years past has been met with extreme selling.

Now, if we can break this level, which I am very skeptical that we will, then there is legitimate reason to believe we would be entering a new bull phase, but considering how overbought we are, how all reversal indicators point to a down turn in this market, I'm confident that we move lower from here, and that we have seen the market's highs already put in.

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Comments

+1 #1 MikeK 2012-01-26 19:41

While the SPX has reached the long term trend line annotated above... its importance is questionable considering all the additional monetary stimulus thats is anticipated in world markets.

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+1 #2 MikeK 2012-01-26 19:42

Perhaps SPY does pause and consolidate in the current price range, but a dramatic sell-off is becoming more unlikely IMO.

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0 #3 MikeK 2012-01-26 19:44

Many world markets have lagged the US rally & have tremendous room to run before encountering trendline or former highs ... http://www.shareplanner.com/photos/907mike-k/album.html?albumid=125

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+1 #4 Hiltc 2012-01-26 22:20

Has the world flipped?
Ryan- near term bearish and Mike bullish?
My head is spinning. :cry:

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0 #5 MikeK 2012-01-27 10:15

I am unable to expand... but I'm certainly biased long... because of large continuous short positioning...

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+1 #6 RyanMallory 2012-01-27 10:29

Funny comment by Hiltc there.

Mike, I agree that shorting the market may seem futile at times. But the stimuli, bailouts, Fed easing has been happening in since 2008. And while they may roll out new programs and strategies, I find it difficult to line that up with Technical Analysis. As a chart guy, I have to go with what I see on the charts. Europe and other markets may be lagging the U.S. market because they 'may' be better pricing in the global economic factors- just no way to know really.

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