2 POTENTIAL OUTCOMES. PICK YOUR POISON.
The S&P 500, as I commented last night, is at a point where it is facing some stiff resistance ahead. What makes the task at hand that much more daunting is the fact that a majority of indicators are telling of an imbalance in the markets between bulls and bears, which is in real need of being readjusted. In other words, we've gotten ahead of ourselves and the bulls need a break in order to prepare for the next leg of this trip.
The eventuality for the S&P 500 comes down to 2 distinct paths:
1. We begin a pullback within the next couple of days. It may be a pullback that is part of the top building process...perhaps we test the current highs one more time. My main point is that the top building process continues within the confines of the current range.
2. The S&P 500 blows out the top end of its ascending channel, going into overdrive and annihilating the bears completely and totally. On the surface, this may seem like a dream to the bulls. In reality, it will prove a lot more damaging in the long run. It will be similar to Charlie Sheen on his last bender before entering rehab. It's reckless, may cost the bulls a lot more money than its worth and will prolong the misery of the coming correction phase, otherwise known as rehab.
The simple reason for this is that the more hardened bears you blow out of the water and the more anxious bulls you lure into the water, the more vacuous the bids that support the market during the coming correction become. Hollow bids equal more volatility and destruction.
Moving through important resistance points at the top end of rallies causes those who would have ended up bidding the market up during a correction (the bear who wanted to take profits on his short or the buyer who wanted to take a position in his favorite stock) to become sellers as the market corrects, thereby exacerbating the downside of the market.
These are the 2 potential outcomes for the market here. Pick your poison.
