Minor Excess Bullishness Post Breakout
Following the breakout last month above the 1185-95 level, the market has spent much of the past 6 sessions backing and filling from the spurt up thru resistance.
My partner Kevin Lane of FusionIQ writes: “As seen in the chart below the S&P 500 pulled back to its uptrend line near 1,194 (green line) on Friday. Just underneath this uptrend is secondary minor support in the 1,187 to 1,181 range (red lines). At this point the recent sell-off appears to be correcting an overbought and slightly near term over bullish sentiment trade. Though things may get a bit slippery we aren’t expecting a huge sell off at present. If we were to drop below those aforementioned levels then the next big support level is in the 1,150 area (orange line).”
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S&P500 Breakout, with trendlines and support
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Sentiment on QE2 and Breakout has gotten frothy — any pullback towards support and trendline would be healthy:
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AAII Sentiment: back to 2007 Highs
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November 15th, 2010 at 2:02 pm
Agreed. 100 billion per month is one helluva party. Everyone is looking for a reason to sell but is compelled to keep riding. I’ve got my stops in but they have a pretty long leash on ‘em.
November 15th, 2010 at 3:54 pm
I’d still be careful around S&P 1229 – it’s the 61.8% fib retracement line of the great Oct ’07-Mar ’09 drop (we haven’t had a real retracement of this yet, have we?). So far it’s held twice as resistance and may well prove to be the top. I wouldn’t go long in any meaningful way unless and untill that 1229 line is cleared convincingly
November 15th, 2010 at 5:33 pm
Moved from fully invested to 92% invested. Still bullish, but conditions dictated invoking my parabolic rule:
Patiently observe the parabolic rise, slowly count to three, and sell something.
November 15th, 2010 at 10:50 pm
All the excitement among individual investors amidst a market that has gone nowhere the past year, let alone the past decade — and this amidst a Fed policy 100% certain to deepen the contraction of both the physical and financial economy (the Fed can’t prod demand, so its only remaining policy alternative is to collapse supply by attacking margins) — reveals just how hard irrational exuberance dies.
Yet this is not so much being displayed with increased buying among a broadening array of interests (circumstance essential to sustaining an advance). Rather, persistently contracting upside volume since March ’09 instead reveals irrational exuberance exists among those [fearlessly] holding long positions, apparently expecting that crisis threatening the capital structure all the way up to sovereign debt (this on top of a mountain of insolvent bank debt) will somehow evaporate and usher a return of the shadow banking system and its infinite multiplier. Were only the Federal Reserve not a lilliputian regulatory institution against a private, wildcat financial system built via a fraud-rife Ponzi scheme such as was resoundingly encouraged during the Age of Greenspan (move over Madoff)!
One of these days exchange circuit breakers could prove the bane of today’s irrationally exuberant. This is the message spoken by elevated bullishness amidst a [fascist] Fed policy meant to simultaneously hasten economic contraction while TBTF money changers are kept liquid, this so that these might steal valuable assets (shed in contraction) for pennies on today’s dollar and sustain their obscene leverage.