Marketview: 60 Points and Running

Trying to gain some altitude.

The week started off with sentiment about as low as it can get.  A modest short squeeze on Monday afternoon gained momentum and culminated with the announcement overnight Thursday that the PBOC would kick off some monetary easing.  For the week, the market opened on the lows and closed on the highs with decent breadth and the right sectors attracting money.  With a total gain of 3.86% on the S&P index and only two stocks in the $OEX negative for the week, this is undeniably constructive price action for the bull camp.

The continued drama erupting out of the Euro Zone has increased the magnitude and duration of what started out as a run-of-the-mill correction.  We’ve overshot on the downside by a good 40-50 $SPX points from where I first anticipated support would come in.  Just goes to show that precision doesn’t pay.  Just like when we were in the back half of 2011 we need to see value stocks pick up a bid and stay bid for the rally to become self sustaining.

The bears have the looming possibility of a disorderly Greek exit from the Euro Zone and the phrase “off a fiscal cliff” becoming a national catchphrase by October.  Modern life balances on a razor’s edge and a singular event coupled with the potential contagion could derail the economy and European societal structure.  They have a true lack of leadership in the Euro Zone at the moment and if they don’t get it right soon, life could be out of balance for a significant period of time.  In the near-term it’s a binary event.  In the long term we’re all in deep trouble due to the overwhelming structural imbalances.  The bulls have an economic recovery that’s trending in the right direction (just more slowly that anyone would like), an election year, worldwide dovish central banks, and a crowded bear trade.

I will be watching how the market works through the overhead supply.  If we continue to advance, the pace and composition of this leg up will be a good tell for the remainder of the year.  A market that sprints higher will have me super bearish and looking for a disaster second half.  Deliberate back and fill and basing and advancing will make me more constructive for further bullish action.  It makes me shutter to think about lower lows from here due to the binary nature.  Remember, the potential is still there for new all time highs in the $SPX.  Time will tell.

Winners: $APC, $OXY, $BAC, $C, $MET,$HD, $LOW, $FCX

Losers: $BHI, $HAL, $GOOG, $DELL, $PM, $MCD, $JNJ, $PG

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