SP500 cash moved to a new 14 month high today at 1126.48. The Dow cash came within 25 points of a new 14 month high print, with today’s high at 10541, with the old high at 10,566.
More than likely, on Friday during the abbreviated session, we will blow through that.
I wrote before that there will be some pent up demand, especially at the first of the year. So many people I know, myself included, sold out portions of their stock holdings between Feb 09, and subsequently during the rally back to 10000. Many people I know and respect actually have been short, off and on, since the Dow got back above 10,000, and again when we got above 10400.
If we get a good rally in the first quarter, these bears will be forced to throw in the towel. And that is my fear for the next big correction. I could see a situation where the market makes fresh new highs during the whole first quarter of 2010, at which point we will have two or three negatives coming together. 1) Increased volume on new highs, while the last year rally was marked by shallow volume, 2) more retail and individual investors deciding to plunge back in, after missing the 4000 point rally, and 3) final capitulation from die hard bears who were short all the way up, finally couldn’t take it any more, and then threw in the towel.
At that point, I could see a situation where we would have a nice 20 or 30 percent correction. So assuming we trade up to 11,000, a 30 percent correction would be a crack back to the 7500 level. That would be enough to put individual investors off of the stock market for the foreseeable future. Its just a theory I have, and theories are like belly buttons, everyone has one. So take it with a grain of salt. I have just been playing that old game, “what if…?”…
Merry Christmas, Happy Holidays on this cold, snowy, rainy, night in Chicago. I hope where ever you are you are with loved ones, grateful for the simple things, hopeful for the future opportunity the 2010 holds.
