SOMETIMES ITS FUN TO DO IT SIDEWAYS
I commented on Twitter earlier today how an increasing number of market commentators who were expressing concern about the rally at 1050 on the S&P 500 have now embraced the bullish move with a full frontal hug.
The market closed only 4 points higher than the intra-day high on Wednesday, but the change in sentiment as a result of that 4 point increase is terribly disproportionate. Traders and investors have gone into this weekend feeling more bullish than they have in months. It may be for good reason, as the type of explosive move we have seen since October 4th typically results in a bottom that is sustainable for a period of months.
That does not, however, mean that we won't get pullbacks along the way. We continue to be at one of those points where upside will be difficult to come by for the next 1-2 weeks. I would be surprised if we see too much weakness. I would also be surprised with further strength. In fact, further strength will result in "super move" that will hurt the bullish case. A break above 1240 on the S&P 500 next week has the potential to result in a move to 1300. While this will be stimulating for bulls in the short-term. Long-term it will make for an unstable trading environment moving into November and December.
That leaves us with the sideways range I discussed mid-week. 1190-1230 is what I mentioned at the time. We moved down to 1190 on Thursday and closed on the high end of the range (1224) on Friday. Expect more back and forth.
Bottomline: The bullish bias of the markets should continue well into November. The remainder of this month, however, may be more sideways than anything else.
