Bulls on Parade

Apr 20, 2007: 10:08 AM CST

The Dow and S&P 500 just made new and impressive highs above the February swing high and seemingly continue unabated, despite temporary overbought oscillator conditions.  In trending markets, oscillators are useless (RSI, Stochastic, etc) and people can get very whipsawed using them in positive feedback environments (where higher prices lead to short covering and new buyers which lead to higher prices and the cycle continues).

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S&P 500

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In these indexes, the bulls are (currently) in complete command, and we have experienced 8 commanding up days (7 in the S&P 500).  The last time we experienced 8 positive closing days was a few weeks ago and the time before that was four years ago!  This is impressive movement for the market, given the amount of pessimism still out there from a sentiment standpoint.

It seems like only yesterday, I was discussing whether or not the Dow could break resistance at 12,800 and now commentators are discussing “Will the Dow soar to new highs at 13,000?!” and the answer is that it is possible and perhaps likely, but there probably will be a few consolidation or down days before that happens.  It would be extremely rare for the market to experience 10 or more straight up days with no down days inbetween.

Also, just because something isn’t likely doesn’t mean it will not happen.  Traders must be open to all possibilities and closed from none – it’s still not about being right but about odds and making money.

If you are a bull, enjoy this stampede.  If you are a bear, get out of the way – there’s no sense trying to fight this rally.  A sell signal occurred yesterday by most people’s standards (oscillators, swing movement, etc) but was quickly erased/faded by the large gap up this morning and trend-day style price movement.

Keep up with the big picture and try to enjoy the action.

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