Hank, while NYSE volume was a bit low, Nasdaq volume was quite o.k.; with regards to the internals, yes, they are still weak, but they are clearly improving. NYSE members have been net buyers for five weeks in a row while sentiment has turned very bearish recently. put/call ratios, Rydex ratio and sentiment polls all pointed to a bottom being near. important supports have held for most indices and only the transports, utilities and the dollar index still look sick. since the market reacted to the PPI with a violent rally, i expect the CPI to have more or less the same effect. there is no doubt in my mind that the CPI will come in at or below expectations. i had expected various price increases to show up in the PPI numbers, but the government statistics minions did their usual reliable job of baking it just right. they will most assuredly do the trick again with CPI. money has been flowing out of equity funds in the past two weeks and sits now in money market accounts waiting to return to the stock market. since very few people seem to believe that this rally has legs, it may well go further than is generally assumed - all good rallies are met with skepticism at the outset.
i will admit though that there is still an outside chance that this is a bull trap - the possibility always exists and has to be included in one's deliberations. as i have said before, very little in the way of excesses has been removed by the correction and once again we did not get a high volume capitulation day, perhaps due to the widespread expectation that we would get one. of course i agree that at some point the wide a/d line divergence and the incredible reality disconnect will catch up with the market and produce a noticeable decline. it could happen anytime and this requires one to stay nimble. but the reversal from the recent lows has been very convincing so far, so we'll have to give the rally the benefit of the doubt here. we'll see how the SPX handles the meeting with it's overhead 50-day ema, the INDU and the NAZ have already gone back above theirs. the current spots of weakness mentioned above will also have to kick in and contribute - if they do, we'll be off to new highs. last but not least the treasury bond has made an impressive reversal today which looks like it could be the beginning of a pretty decent rally as well. there is one major caveat that applies both to the bond and the dollar, and that's foreign capital flows. they need to reverse their recent trend or all of what i have said in this post may come to naught.
re:OT, no, i'm an Austrian citizen and i trade for a living.
regards,
hb |
