Bulls Push Ahead

Pre-market futures are up over .70 cents as the SPY is set to have another gap. The banks are right in the middle of things as usual. There were concerns that BAC and C were going to have to raise $10b each in order to meet the demands of the stress test. Then Warren Buffet got on CNBC and said that WFC and USB were going to be just fine, so now the banks are just fine. Then the Fed said "we haven't given BAC and C an actual final figure on raising capital." The banks went from being in bad shape to being in good shape with just a few kind words form a couple of nice guys. Isn't that sweet.....

The market gapped up this morning, and will probably attempt to test the area of the highs on Friday (89 on the SPY), but watch for some prophet taking again in that area just like Friday. The key to whether or not there is a play this morning is two fold. The first key is to trade stocks and not the ETF's again, and the second key is what kind of price order we get out of the gate. If we get an orderly wiggle on the 5m charts then there could be a nice push to 89.00 and there could be some nice short term stock call trades.

7:39 am MT: The wiggle out of the gate is a little choppy, but the bulls look like they want to take a shot at the 89.00 area right about now.

7:40 am MT: There's the push to 89.00, so if you are working with calls right out of the gate on some individual stocks you will want to watch that area to take about 1/3rd of your profits and snug up your stops.

7:39 am MT: The wiggle out of the gate is a little choppy, but the bulls look like they want to take a shot at the 89.00 area right about now.

7:40 am MT: There's the push to 89.00, so if you are working with calls right out of the gate on some individual stocks you will want to watch that area to take about 1/3rd of your profits and snug up your stops.

7:46 am MT: The SPY made it right into the resistance zone, so this is the first profit-taking area.

Here is a current 5m chart of the SPY showing the move to resistance:
(click on image to enlarge)

At this point in the morning, it's important to lock a little of your gains, keep 1/2 - 2/3 of your position, and snug up your stops to breakeven. Then watch to see if the next move on the 5m - 10m charts is a Bull Flag or orderly consolidation. If the market stays orderly and fairly tight, then the bulls may try to push through resistance a little later in the morning. If the bears step in and take sharp profits then two things will happen: Your breakeven stops will get triggered and the market will fall through the gap at 88.40. I would put the odds at about 55/45 that we get an orderly consolidation and another little push by the bulls, so it's not overwhelming in favor of the bulls right here, but there's enough possibility to keep some of your positions on the table as long as they are protected. We'll see how the next stage of the morning forms.

7:58 am MT: There's a push through resistance. Use this as an opportunity to take a little more profits because any move into the 89.10 - 89.25 area and the market is going to get a little parabolic on the 5m charts. Once again, you want to keep a bit of the position on the table in order to take advantage of more bullishness later in the morning.

8:03 am MT: This is why you keep some of the position on the table. The market just went hyper to the upside right about the time of the Construction Spending/Pending Home Sales release. This parabolic move on the 5m charts to the 89.60 - 90.00 area (wherever it gasses out right in here) is a place to lock down most of the rest of your calls from this morning. Then look for a nice consolidation (if we get it) on the 5m - 10m charts to add a little back for another push later this morning.

8:10 am MT: The 89.75 - 90.00 area looks like the gassing out point for the first push this morning. 89.75 may be the high for this move before the next consolidation on the 5m charts, which might also lead to a 20m - 30m consolidation before the next push. The bulls are frenetic, and the shorts are running around screaming, so this could stay a bit parabolic for a while longer.

8:20 am MT: In the bigger picture today the bulls are pushing the market to new highs on better than expected manufacturing in China, "good news" from the banks, and better than expected housing data.

Here is a chart of the SPX showing the break to new highs:
(click on image to enlarge):

The report out of China that manufacturing expanded for the first time in nine months, along with the housing data this morning (Pending Home Sales 3.2% vs. 0.0% expected and Construction Spending 0.3% vs. -1.6% expected), is putting the warm air right under the bulls. They can feel the wind beneath their wings. Think Leonardo DiCaprio on the prow of the Titanic with his arms spread wide in total exuberance and shouting in his squeaky, high-pitched voice "I'm the king of the world!" That should give you a visual for what the bulls are feeling this morning.

The first wave of buying is probably about done as the market has gone white hot parabolic and is now finally tipping over on the 5m charts. But the emotional exuberance is probably going to linger through several more pushes today and several more days this week. It will take a 50 ton wrecking ball to knock these bulls off the prow of the Titanic. So I will probably be staying with calls for the rest of the day and the next several days besides. The next key resistance on the SPX is the 920 area. Support is the 870 - 880 area.

9:05 am MT: Here comes another little push. This should take the SPY to 90.00 and perhaps a little beyond. If the market moves into the 90.10 - 90.25 area in the next couple of minutes, then the overall push this morning will be probably be pretty exhausted and the market may need to consolidate for more than an hour, maybe even several hours, before it tries to climb again.

There's not much more to say about today other than it's strongly bullish. If you made some nice profits on calls already this morning, then look for the next orderly consolidations on the 15m - 30m charts during the mid-day to get back in and see if the market makes another bullish push into the close. The only red flags will be if the market sees some sharp selling that drops the SPY back below the 89.00 area. The red flags will turn into drop dead confirmations if the SPY sells down through the gap in the 88.35 - 88.50 area, but the bearish scenario is much less likely on a day like today.

10:48 am MT: This is the first leg up on the 15m charts after the mid-morning consolidation. I won't be surprised if this doubles back down a bit and the market consolidates for another hour or so before making a final attempt at a push in the afternoon.

11:44 am MT: The next leg up came a little earlier than expected. It means the market will probably push a little through resistance, but the bulls didn't give themselves enough time to digest the first move, so the second move may not go very far beyond the morning highs. Probably the 90.10 - 90.25 area will be resistance on the current move. So far, Leonardo is still screaming at the top of his lungs, so the bulls keep sailing forward.

12:05 pm MT: The leg up topped out at 90.12, however the bulls keep pushing the market. So the SPY could still form a short Ascending Triangle on the 15m charts and reach for new highs.

Remember, this is the fund managers today:
(click here)

On the downside (it's always good to have a lifeboat.....), a drop below 89.50 - 89.35 on the SPY would be a red flag. A drop below 89.00 would be an extreme red flag. And a sell-off below this morning's gap at 88.35 - 88.50 would be a drop dead signal for the Titani.....hmm, hmmm, I mean the bulls.

12:29 pm MT: There's the breakout to new highs on the short Ascending Triangle. Well, this has been a bullish day, and it will probably keep pushing here and there, but the 90.25 - 90.50 area may be the top of what fund managers are able to sustain today. There will be some jostling for the next 90m, and perhaps some profit-taking, but overall, this day tips decidedly to the bulls.

2:45 pm MT: Market Wrap: When the dust settled the SPY actually made a very late push at the end of the day for a final tally of 90.88, which is a little beyond what I expected, but not that far out of line with the bullishness of the fund managers. Today, they really did feel like the king of the world.