A couple of things that I shall try to cobble together.
Technically, there appears to be no evidence of a top, if you think about it. Indicators like A/D, Put/Call, are all okay. As a result, I think it's a critical time to be alert for a pullback. I think you are correct in that another hundred or so DJIA points are in the cards but think about this...
I remember there was some discussion about the bullishness of a Holiday week. But thin weeks are notable more for short-covering ahead of a long weekend. Who will be covering this time? Not the shorts, in my opinion. Look at Globex...as I type this it's up 570 basis points and had been up over 1000. The longs are making the money so I think it will be the longs who take money off the table this week.
Also, although the bonds seemed to stage a breakout on Friday, stocks did not come along for the ride. This brings up another thought that runs counter to my own thinking that a Nikkei breakdown would be short-term bullish for the US markets....flight to quality and all that. I just read a commentary that put forth the suggestion, well-discussed in the past but I forgot about it, that with the Nikkei breaking down Tokyo will have to sell off US Treasuries. So the short-term incoming capital to be expected from Japanese investors as a result of a market breakdown should be offset by the need to raise cash as a result of the decline in capitalization. In other words, they'll need the money.
For my own part I have no idea what I will be doing yet today, but with the Globex sailing even higher right now I would say it's a fair bet I will be short early. |
