Are we there yet, is this pullback coming or what???

This market continues to push higher against all odds. With G20 carnival pretty much wrapped up everyone braced for ugly unemployment numbers on Friday. The majority expected some type of corrective action to take place but after a brief sell off, the market came back to close up again.

As of 3.20pm, the tape seemed totally calm and without much direction oscillating between slightly negative and slightly positive. But with less than 5 minutes to the bell, the financials took off like a rocket, a clear enough indication that institutional money is getting back into the market.



Several observations over the past two days.




1) Money continues to flow into cyclicals with industrials, oil and gas, consumer discretionary, financials and tech...while defensive and healthcare are cleasrly lagging for the last four weeks...

2) Gold and Gold miners are also seeing some selling today. I think it may be time to strat picking up some gold e.g. GLD, but gold miners are too extended to chase.

3) China and other emerging markets also continues to attract capital, but the sizzle is not there on Friday. Looks like this trade is getting tired as well.





We have now achieved or surpassed my 1st set of targets for DJIA, SPX and COMPs and there seems to be much more of a positive tone about. The short trade has gooten a more difficult as the easy one e.g buy FAZ, SRS, SDS, etc...has not been working and even the most pronounce bears are no longer willing to throw additional capital to average down the losing trade.

We are not out of the woods by any stretch yet, but the market psychology has improved, stimulated by positive headlines over the past few weeks and even negative news that in the past caused panic selling no longer seem to bring in any significant selling volume.



There are many professional money managers with sizable cash on a sidelines, waiting for this pullback, realizing that being in cash now could result in a significant underperfomance. If we continue in thesame fashion for the next week or two, we may see some of them get 'scared into buying'. I can see this scenario playing down the road if we don't get a pullback soon. Speaking of a pullback, I think we may eventually get one, but I believe it will be pretty shallow.



Here are my current pullback/move up targets:





SPX - 837. Support 800-810, Resistance- 860-880

DJIA - 7990. Support -7650-7700, Resistance -8400-8500
COMP -1615. Support- 1500-1550, Resistance -1630-1650



Strategy for next week:

I am still positioned for a shallow pullback which I would like to use to buy or add to several positions.


I have sold some near month calls against some of my most overbought positions. This week most of my buying was in a reflation trade names, gold, silver and some of the oil and gas and infrastructure names. Other areas of focus : technology, and some beaten down healthcare names.


Good Luck to us all next week....