Touchdown!

The bulls scored their fourth touchdown today, and unlike the Houston Texans they didn’t require any overtime as the writing was on the wall right out of the gate.

Some food for thought to anyone betting the farm on the downside here: Yes, with every push higher the odds of a reversal increase. But let’s not forget the playing field I posted over the weekend, which roughly maps the long term channel on the SPX. We are now above the channel and as such we have added yet another support line to the bulls’ arsenal.

So where do we go from here? I do have some ideas:

Now that we are finally out of that dreaded channel I can start thinking about wave scenarios again. Don’t get married to the chart above but here it goes: Soylent Green has been updated to accommodate a much needed reversal as we are in highly overbought conditions. That reversal of course could take on various forms, I have only plotted the most simple arrangement. The current target is SPX 1180 – for now – let’s see how velocity/participation unfolds moving forward.

Bear in mind that we will be pushing into holiday tape in a little over a month or so – and that is traditionally bullish. Yes, another brick in the sarcophagus of the bears – seems that the poor grizzlies just can’t catch a break. Not with Bernanke around that is. FYI – we have two more POMO days – one each on Wednesday and Friday. Caveat ursi.

And yes, Clockwork Orange still has a theoretical chance but if it happens it will have to navigate a veritable minefield of support zones diagonals and who knows what. Quite frankly, I don’t have my hopes up at this point – only a sudden and almost catastrophic event could slice through all that thick brush weed without losing momentum. The bears get another chance early next year – until then it seems the jig is up. Unless we turn this week – right away – no, I won’t discount it altogether but the odds are… well…. remote IMNSHO.

A small sliver of hope remains for the bears – actually I wish it wasn’t so as it would make trading much easier. Anyway, the positive signal on the ramp up has been quite meager on the smoothed long term trend panel (in the middle). But look at the Feb -> May rally and you’ll see that the tape can happily melt higher on fumes. However, should this signal line start dropping below the zero mark then I’d start giving the P3 scenario a lot more credence. Until then – to end on a football term – it’ll remain on the bench.

Cheers,

Mole