Watch the 12,000 level in cash Dow and the 1300 level in S&P.
If the indexes can consolidate around these areas, showing strength, then we may have a shot at taking a new leg higher.
Having Geitner get grilled on Face the Nation on Sunday, followed by the S&P warning shot that the USA debt was headed towards being comparable to Greece or Ireland, if the Congress is not careful got me thinking.
Having the threat of US downgrading the credit worthiness of the country is about as bearish an item I could think of long term.
The US fiscal policy is like a naval convoy of 900 ships with a carrier deployment. It takes a long, long time to do an about face. Its not like a jet ski out there on the ocean.
Ditto for the US fiscal policy. I was born in 1966. My whole entire life I’ve been listening and watching President after President and Congress after Congress raise the debt ceiling.
Like Freshman in college, the US won’t address this issue until they are forced to at the last possible minute to avert academic disaster. Quite frankly, we are not there yet.
The US won’t address its debt issues until that day they have a bond auction and no one shows up to buy. Then, and only then, will the issues be resolved.
But of course, that’s just my opinion.
In any event, I like the concept of these equity markets climbing a wall of worry. to have the equities bounce back after that mini correction makes me think we may be looking for a move to challenge recent highs. A settlement above 12,400 in the Dow Cash opens the door for a rally up to 13,300. A settlement above 1350 in the S&P would open the door to the 1440 level.
Bottom line, on a longer term weekly chart, these stock indexes are at a critical point both from a fundamental stand point, and a technical stand point. The next leg will be powerful. I don’t really know which way its heading. I like fading popular opinion. Right now, we are looking pretty damn bearish from a psychological standpoint in this country. That makes me want to start looking at going the other way.
If you’ve read my blog for the last 18 months, I was bullish the whole way up after the panic lows in March of 2009. To refresh your memory, the S&P traded down to 666. Today we are 634 handles higher at 1300. We doubled in value, and all people can talk about was that down move, still. Its like the rally never happened if you feel the pulse of the national media.
The Dow Jones cash traded down to 6460. Now we have traded up to 12,400, almost double in value. 12,920 will be a double. We have not been able to get above 12,400, but if we pop above 12,400 on a strong settlement, we will hit 12,920 in short order…
I can’t say enough, I am not sure where we are going. We may trade in a 500 point trading range here, while the market decides. However, every time we swallow bearish news like we had yesterday, and bounce back. Action like that makes me lean towards being bullish.
Right now I am happy with the small short position I have left in the Dow. Yesterday my first support was hit down at 12055. That was a good level. I remain short, with buy stops above.
If we get a good settlement above 12,400, I think you have to get long and go with the move. Ignore or fade the public opinion and popular sentiment.
Good Trading
CER
