Bulls Dream While Bears Awake from a Nap

Whether it's real or manipulation it doesn't matter for swing traders, the current short term move in the market is still bullish. Pre-market futures are up on hope for the future and a perceived oversold condition in the market, especially on the long-term chart. Factory Orders comes out 30m after the open, which may act as a catalyst today simply because of timing and not because of the importance of the report.

7:35 am MT: The market gapped up at the open, with the Naz leading the way by gapping slightly higher than the high of yesterday. The Dow and SPX are trying to clear yesterday's highs as well. I'm not a buyer on this gap, it smells awfully suspicious. I will at least wait and see how traders react to a gap test. It may be that the break to new highs out of the gate will sustain, so if you trade calls, just watch that the market doesn't toss an Evening Star on the 10m charts at the breakout like it did yesterday. I want to see the breakout or the gap hold before I get too carried away on a late stage move in the current swing.

I just don't know why analysts are hyperventilating over a market that is being led by Energy and Commodity stocks. The big move up in this current swing has seen oil jump from $35 a barrel to over $50 a barrel. That's over a 43% move up in seven trading days.....hurray......

I have played calls in the current upswing, so it's playable, but I'm not exactly running through the streets with tears of joy in my eyes sobbing for the great bullish victory of 2009. We'll see how this goes, but for now the current swing is still trying to make some noise.

7:40 am MT: I speculate that the short term swing is starting to consolidate, and that the consolidation started with the Doji yesterday. However, that doesn't mean that I might not see a clear indication of a continuation and another leg up. I don't think it will happen, but just in case it does I will watch how traders treat the breakouts and gaps this morning on the Naz and SPX.

Traders are not quite as convinced on the SPY, which is still struggling to reach yesterday's high. I will post a chart of the SPY and Naz in an hour or so, after Factory Orders hit, and after I see if the breakout/gap holds.

The SPX is still looking strong, so if we get an orderly consolidation off the 5m charts in the next litle while, then I will possibly look at some calls. If I had calls right now I would be selling some right into this early excitement in the market.

9:00 am MT: Intra-day Update: The market is at a key tipping point right now. The gap and breakout are being tested. The confirmed bounce on the 15m charts is getting a severe test. The Naz continues to be the strongest index, as I warned several days ago. The SPX is lagging a bit, but a drop in the SPX will drag everything else down.

The price action is just a little loose and wild. Those of you that sold into the early day hysteria when I said that I was a seller and not a buyer, good for you. If the market holds and bounces then there may be another buying opportunity, but I'm still watching this price action closely and cautiously.

9:05 am MT: Intra-day Update: Yeah.....I thought so.....the SPX just gave up the bounce on the 15m charts. We're headed to the other side of the gap and maybe more. The market has to prove itself pretty strongly to me now before I take anything other than a very short swing intra-day. If I decide to play for a continuation of the multi-day swing with anything longer than a 15m chart then I need to see a confirmed bounce on the SPX on the 30m charts. We shall see.....I'm still leaning towards a consolidation day.

Here is an updated daily chart of the SPX:
(click on image to enlarge)

If 920 holds and we get some kind of Rising Three Methods variant, then great, I'll look for calls. Other than that, I speculate that the price action for the next several days, as we head into earnings season, could be more of a consolidation.