His Whole Life Was a One in a Million Shot

The action in the market this week has been reminiscent of the classic movie, Rocky IV. Rocky takes punch after punch directly on the chin from Ivan Drago but simply refuses to go down. His opponent, tired and despondent, eventually succumbs. A wave of negative economic news stories has hit the airways this week, but this resilient market just isn’t having it. Nothing is going to keep the bulls down. Last week we got a surprise discount rate hike from the Fed. This week we have seen the Greece fiasco boil over, a negative consumer confidence reading, and a dreary jobs report, still the market has absorbed the blows and continued on its path of destruction.

The market bounced strongly of March 2008, topping out in January despite a chorus of doubters. The viability of the economic recovery has been questioned, but we are not in the business of having unfounded biases as to market direction. We let the price action do the talking, and right now, it is giving us some not-so-subtle hints. Since the 9% correction, stocks have clawed their way higher and begun to digest some of the volatile action of 2010.

The S&P is becoming tightly coiled and we see a tight wedge consolidation developing that will need to resolve itself next week. A wedge pattern is a pattern of indecision, so we will wait for the resolution to come before sinking our teeth into trades. But all signs point to that resolution coming to the upside. Tech leaders like AAPL, BIDU and RIMM have refused to break down amid broader market weakness, other perennial leaders MSFT and CSCO now look bullish and new tech names are surfacing to give the sector some additional juice. We have been hammering the table on CREE and VMW, stocks with recent strong reports that broke strongly to the upside out of tight wedges in the last couple weeks. Also, the financials are finally perking up a bit, and Gold has put in a higher low.