Nobody knows what is going on. Speculators are stepping forward to buy stocks. (Some of them think they are investors.) But the charts show nothing but sideways. Here’s what’s going on: We are either in a consolidation or a reversal. It is a trading market. Investing in a trading market is not a healthy thing to do. Investors (trend followers) are still short. There may be stocks making bottoms. We looked at the Dow stocks and didn’t see anything we liked. Today on NPR analysts comented that counting all the people who are unemployed (why on earth would you do that?) not just those who are still looking for a job would probably produce a figure of 10 or 11%. That is not a context for strong stocks.
As we remarked previously the horizontal resistance line at 9600 (m/l) goes back to the 2000 market. A powerful hindrance to bull progress. The same pattern is playing out in the S&P.
Interestingly the test of the low looks stronger in the S&P, but we see no strong case for buying stocks yet.
Of course readers must remember that we are in general trend followers and trend followers are willing to give up the first third of the trend in order not to wind up owning Enron.