Jack's Wrap for 04/08/2010 - Tiny Sticks...Needs Catalyst
So what will it take for this market to fall is the real question. Set up to fall. Starts to fall. Doesn't fall! It doesn't fall for a variety of reasons, but first and clearly the biggest reason, being the fear of missing out on something big. People just don't want to be left out in the cold. They don't want to look back some day and said they missed the biggest opportunity of a life time. Every drop of selling immediately gets bought up. It feels like a bunch of little kids who got angry and refused to play with their friends. After seeing them have a good time, they don't want to miss the next play date. Folks are like the energizer bunny. When can I buy? When can I buy? Of course, when too many want in and no one wants out, it all comes collapsing down. We're not there yet so relax. Probably not close either. However, sentiment has to be watched very closely here. Today started out with a nice gap down that looked to be the real deal. I said looked because before too long the market started to churn and ultimately started to go green later in the day. A few attempts to bring back down failed although we did close off the highs but not by much. The problem with today's candle, like many in the past few weeks as we churn higher, is the small nature of the moves higher. No big thrusts which can be a red flag that some deeper selling is coming. However, this is a very intense bull market thus timing it is impossible. Another reason for no shorting a bull market. All you'll do is lose money. Today's reversal again doesn't allow the bears to follow through on a decent move down from the prior day’s action. That's what the bears need to see and they didn't get it today as we saw the bulls take over once again. The tiny sticks continue to make me very cautious near-term. Folks, let me make this clear to you. This has been a wonderful ride. It will end at some point. I don't mean a correction. I mean that it will be all over. For now there are no real signs that this is in the immediate future. I am getting calls and emails about how long this move has been and how this has to end soon. No it doesn't! It will end. All bull markets do. However, wishing it to or being afraid of it makes little sense. Playing what's out there is all anyone should do. Play the message of the market. If sentiment gets over 35% again we'll have to deal with another strong correction. That doesn't mean it'll be the end of this bull. The end of the bull market will come when the market looks out in then future and sees EARNINGS begin to erode over time. When it sees EARNINGS can no longer be sustained at current levels it will end the bull in a heart beat. Not until that time. Always pullback's. Always corrections. The bull ends ONLY when earnings can no longer move upward. The market will tell us this how? When it loses the 50-day exponential moving averages across all the major indexes on big volume on a full red candle stick. It's really that simple. For now we're still in buy phase as stocks like Amazon.com (AMZN), with PE's in the stratosphere, are still rocking higher. Transports, along with many other sector charts, are trying to make new breakouts and that's all we need to know about this market. Bull flags are still breaking higher. Selling will ensue when some of these set ups begin to finally fail. Then we can start a real selling period of some days or weeks. With these sectors breaking up again it's too early to get on the bigger pullback train. It can happen at any moment based on the divergences on the daily charts but you have to see it happen first. It's going to be impossible not to get caught in a play or two at the end of this run because constant scratch is necessary but getting aggressive here makes little sense. You can play objective set ups for sure but just not too many at any one time now. For now the bull lives but with more caution. Peace, Jack In viewing the SPDR Dow Jones Industrial Average (DIA) Daily Chart you'll see that there has been 4% more or less lateral price action the last couple of weeks on the Dow/Diamonds while our 20 EMA races higher to meet our current price consolidation.