Saturday, February 19, 2011

Extreme bullishness

Looking back from 2003 to 2011 and I can hardly see any other period as bullish as one saw in the last 6 months. Maybe July 2006-February 2007 but even then SPX advanced from 1020 to 1220, not from 1040 to 1340. Even more, weekly DMI it's officially at the highest level in the last 10 years equalizing the level saw on January 2004.

Market has probably more room to move up since I don't see bears giving up. Many days on the last 3 weeks I saw VIX moving up despite market moving up as well signaling that the option players are still heavily buying puts anticipating a reversal. But what if the market continues to moves up? Well, bears are going to get squeezed again and they are going to be forced to cover (buy) pushing the market further up. Until we are going to see a move bellow April's low on VIX the rally is going to be intact. Another possible sign of a reversal is going to be a higher high on SPX followed by a plunge by the end of the day. So far exactly the opposite is happening, market is giving up a few points in the morning and finishes at it's daily highest value.

It would be interesting to find out who is buying at this point, are the mutual funds or the little guy. If mutual funds are buying expect more movement on the upside, if the little guy is buying then we are closed to a top, a big one or a small one, who knows.

Silver had a huge move on the upside in the last few days and there are rumors that there is a shortage on silver coins!

Next week we are going to see another round of earnings with HD, WMT, HPQ, LOW, PCLN among the big companies that could potentially move the market. 

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