We have moved up over the past five months quite powerfully. There have been many critical levels of resistance along the way which have been headaches initially but in time have all been taken out by the bulls, putting those levels in their rear view mirror. 956 on the Sp was the last big one that seemed as if it just couldn't happen. I mean come on, we've come so far so quickly, that level will fail for sure. Not to be the case. That too went away. Now we see two levels that are seemingly just too tough as well. One is the multi down trend line on the Nas at 2015. We've been banging on the door with the market being very overbought. Surely the overbought alone is enough to stop it cold. That has been the case thus far. We keep getting right there only to see the market pull back. On top of that multi year trend line at Nas 2015 we also have a bigger one to overcome. Very quietly, and not talked about by basically anyone, we are up against the 70 week moving average at 1036 on the Sp. We still have a ways to go to get there. Why am I focusing on this? because historically, the 70 week moving average, when in a true bear market, has stopped all rallies dead in their tracks. It has caused one bull run after another to top out and collapse back down. With the market extremely close to Nas 2015 and fairly close to Sp 1036, and because we're so overbought, this would be a perfect spot for that pull back we've all been waiting for. Doesn't mean it's coming. If you go back and look at April-June 2008 we stayed at rsi 70+. Two plus months so it can happen. Doesn't mean it will. We all have to be prepared for a sharp pullback at any time. Here's the reason for why the bears are desperate here. If we do clear with force Sp 1036 and Nas 2015, we are in a confirmed bull market. No question about it. No longer can we say this is possibly only a bull market rally within a deeper secular bear market. The bears know all the other levels that were taken out hurt them badly. They know if these levels just mentioned get taken out, they're dead for good. So if you think they were desperate at other levels along the road, you haven't seen anything yet. These are I'm going to my death bed levels and I am not going down that easily feelings from the bears. These are the levels they defend the most. If the bulls can keep things close for a while, the bears will get worn out. Incredibly interesting and important times indeed.
The futures were up a bit this morning in anticipation of the huge jobs report that was due out at 830 am eastern time. The thinking was for a loss of 275,000 jobs with an unemployment rate of 9.7%. There was also the thinking that revisions to the past few months, as babbled by a popular Cnbc commentator the day before, were for additional losses of over 100,000. Wrong! Revisions were only 43,000 and the actual monthly losses for this past month were 243,000. Better than expected. On top of that, the unemployment rate was 0.3% better at 9.4%, rather than the 9.7% expected. Job losses, the unemployment rate and revisions were all better than expected for the bulls thus futures blasted off. They pulled back some before the market opened but we still had a nice gap up. The market started to pull back adn we were printing ugly black candles in the first hour. It looked bad but out of nowhere, we blasted back higher and were up nearly 200 points on the Dow before late selling took us down pretty good. We got to the breakout on the Nas at 2015 but couldn't get the job done. A solid day for the bulls. We're still overbought. We're still on an overall major buy signal. Shorting just because we're so overbought is too risky. Sticking with the overall trend makes the most sense. Dealing with pullbacks is something we'll have to deal with. Just the way it is. Some exposure is necessary at all times when on a buy signal. Keep with the trend please.
This has deteriorated some with the bulls now a bit over 20% more than the bears. This is not where bull markets run in to trouble, It usually takes nearly 40% more bulls before things get out of hand from a sentiment perspective. The put call ratio is on the lower side but nothing at all on the dangerous side of the ledger. No repeat days of below 0.60. Most days in the 0.70 range. When we sell some, it ramps higher than that. we're not at a level of optimal bearishness but by no means are we at a point where this should all come crumbling down.
The Financials led the way this week led by the Banks. Most other groups saw decent gains including the Aerospace Group led by solid moves by BA and UTX. The Transports continue to show solid price action and the Retail area showed some signs of firming up late week. The Materials area continues to show some good relative performance. The Commodities on the other hand started to lag due to a combination of late week strength in the US Dollar which is starting to setup in a Bullish Falling Wedge Pattern (see our 5th chart below) and weakness in the Shanghai Market which after tagging the 3,500 level stalled out late week at our Downtrendline (see our 6th chart below). The Biotech/Healthcare areas lagged somewhat this week after strong recent moves. Some of the recent leading stocks in various groups started to take a breather during the week including GS, RIMM, and others while the second/third tier picked up some of the slack keeping the bid under the overall market.
The Week Ahead:
A big week ahead as we see just what the bears have with regards to stopping the bulls from taking out Nas 2015 and Sp 1036. There isn't nearly the type of economic reports to come as we had today. We also no longer have the major earnings reports to worry about. Most of those are past us. the market can play on its own without too much outside influence. With most of the recent news being positive, the onus is on the bears to stop the bulls cold in their tracks. A pullback from overbought can happen at any time but don't forget that we're clearly still in a buy signal. Very interesting times are upon us in terms of the lnoger term picture for this stock market.