So far so good, but we're still stuck in the middle.

Thursday's rally was impressive.  The market tried to drop early on but the support trend line held again and we closed strongly.  We are still stuck right in the middle of that 1185 to 1212 range so although it's a nice start, we need to see a little more.  Volume has been OK but the last two positive days did not match the volume of Tuesday's sell off.  The S&P 500's support and resistance is getting squeezed from the top and bottom and something will have to give in the days ahead.

                 Chart provided courtesy of www.decisionpoint.com

Although I don't know exactly what the catalyst might be for a bull market, sentiment is worsening, or improving, depending how you look at it.  The AAII Investor Sentiment Survey came out at 32% bullish, 32% bearish.  That 1 to 1 ratio is the point you start to look for a turnaround in a falling market.  Preferably, we'd like to see bears closer to 40% and slightly higher than the bulls, but this is a good start.

I would normally be more inclined to believe this is no more than a 2 to 3 day bounce after a large drop but those odd-lot short sellers I talked about yesterday (see yesterday's comments below), who are usually wrong, were betting excessively that the market will decline further.  I don't like to pick one indicator to base a decision on but these sentiment indicators are my favorites.  This has me leaning toward believing we are getting close to a short term bottom. 

The longer term is a different story.  We could bob and weave for months as we did the first half of last year.  We are likely still consolidating so I don't feel an urgency to get back in the market.  But as I mentioned yesterday, I would be in favor of getting invested in the stock funds on any more significant weakness.  I hope yesterday's early decline wasn't that opportunity. 

It's funny that Wednesday and Thursday morning, all the analysts on CNBC were talking the same talk l was about 1163 and 1150 needing to be tested before we can rally.  When everyone is preaching the same message, we are usually wrong.  I don't have a hard time admitting that my instincts are usually wrong.  That's the way the market works.  I have come to be honest with myself that I am my best contrarian indicator.  I'm not saying I go against my indicators.  They don't lie.  Betting against your fear or excitement can be difficult but it tends to be the correct thing to do.  For me anyway.  And for the record I am leaning toward being nervous right now.  A good sign that the market will proceed upward. 

That's all for today.  Currently 100% G fund.  I'm still vacillating on the short term market direction.  This is not an easy call so I would rather err on the side of being too conservative right now.  I won't rule out the possibility of a transfer this morning if something out of the ordinary happens before the deadline.  Have a good weekend.