Near resistance.  Will buyers continue to step up?

Once the Dr. Bernanke monetary policy meeting with congress began yesterday the market took off, even before Bernanke said a word.  The S&P 500 peaked out near 1281 before sliding downward for the next couple of hours.  From there the market climbed its way back toward the morning highs. 

       


I would call that an impressive follow-through day but the next couple of days will pose a test.  The S&P 500 is now sitting just below the declining trend line which could act as resistance here.  If buyers can continue to push up the index without using this resistance area as a place to take profits, it will give us an idea of how strong this market really is and may signal us to take advantage.  The Dow has done.  Can the broader market follow?


                              Chart provided courtesy of www.decisionpoint.com

As we have talked about before, February tends to be weaker than most months and fortunately for the market there are less than two weeks left.  Today is the 12^th trading day in February and for whatever reason it has a poor record historically.  I don’t usually pay close attention to these day to day past performances unless something is out of the ordinary and today comes very close to qualifying as one to watch.


                             Chart provided courtesy of www.sentimentrader.com

Again I feel that the market really needs to make some kind of a negative move here to rebuild the psychology leg, which along with the monetary conditions leg, has been suffering and I believe could keep the market from having that big year I have been anticipating.  It’s kind of like trying to paint your house before stripping off the old peeling paint.  If you don’t get rid of that old layer of paint it will keep the new coat from looking its best and from lasting as long as it should. 

A market that doesn’t do a good psychological cleansing now and then will not have a strong foundation on which to grow.  The weakness in February has been a good start.  But if the market keeps rallying from here I’m afraid we will see more peeling before the year is up, keeping us from getting a decent double digit gain (20% – 30% or more) in the S&P 500 which we haven’t seen since 2003.   And if that is the case I will want to focus more on short term moves which means more bobbing and weaving in and out of the funds.  That is something I don't really want to do.

That’s all for today.  Currently 100% G fund.  Thanks for reading.
 

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