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The Broad Market

Bears about to be wiped out -- "The Mother of all Short Squeezes"

We now have an extraordinarily bullish setup for the broad stockmarket, which as we will soon see is considerably amplified by the latest Commitment of Traders data, that is unprecedented in the writer's experience, and startling.

On the 6-month chart for the S&P500 index we can see the powerful breakout from the Head-and-Shoulders  bottom that occurred nearly 2 weeks ago. The day after this breakout the index continued higher, only to run into the underside of a wall of resistance approaching the highs. A bullish horizontal Flag has since formed that has allowed the market time to soak up the overhead resistance - the bullishness of the situation being confirmed by the volume dieback as the Flag has formed and the advance by the volume indicators, Accumulation-Distribution and On-balance Volume (shown at the top and bottom of the chart), to new highs.

The latest COT data is startling, even to experienced market players, and, assuming that the data is to be trusted, suggests an extraordinarily bullish setup. According to this chart, Small Speculators have suddenly reversed position, going from being very bullish at the top of the breakout spike, to very bearish by the close of last Tuesday's trading, which is the point at which the latest data on this chart is taken. Although it has dropped, the Large Spec short positions remain at a high level, while the Commercials' long positions have rocketed in just one week. All of this points to "the mother of all short squeezes" driving a very powerful breakout to new highs - and soon. Remember the market doesn't need a great economy to go up, just unlimited liquidity - and the Fed has resoundingly demonstrated that they stand ready to provide it, no matter what the consequences.

Stock and option specific information follows for subscribers...

 

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