It is tempting to conjure images of powerful manipulators in conspiratorial concert, aimed at keeping the market rising. Alcoa projects global growth, Intel projects global growth... bears were suckered I tell you! The H&S broke down! How could that be reversed with such a strong winning streak?
Because this is the markets and while the manip surely goes on, there is no denying the fact that sentiment got all screwed up to the downside. The rally had to happen to correct this. I would have been more bearish at the end of Q2 if the dumb money had remained stubbornly bullish despite terrible market action and associated trend changes in the daily and weekly time frames. Instead, mania is the norm; both to the fear extreme and the hopeful one. Can you imagine how many people are out there buying and selling based on these emotions? What do you think is the mindset of someone who sold in May or June, only to see the wonder rally and "global growth" theme regenerating right before their eyes?
I hold the Dow and SPX bear positions still - again, not anywhere near net short - with the S&P barely tickling the 1100-1130 target zone. AA and INTC's reports, when you tune out the noise, could serve to announce "it's as good as it gets!", allowing the scared money to buy back in to some degree. But we got the projected rebound in sentiment already, in the first half of June. Dumb money does not have to climb too far from this point to become a positive factor for the bears once again. This is a diminishing returns type of situation, just like the prices of the stock indexes.
I will let the work dictate going forward, much of it unfortunately cannot be published here. But there are a lot of savvy readers out there, and they'll know the drill. There is no need to read into the market our own particular agenda. For me, the global growth story is real and the deflationists are like straw men standing against an oncoming inferno. As some commenters have noted, they will burn the money - or whatever those digital entries are they keep typing in - in an effort to keep asset prices and appearances aloft. The only question is how long will the deflationists be right in the interim?
A subscriber questions my ability to be bearish Alcoa ($8 H&S target) and yet be bullish on emerging Asia, for example. The answer is simple; it's all in time frames. There will likely come a time when I am bullish on AA. $8 is not the end of the world, it's just an interim target. It is helpful to bifurcate (or tri, quad, etc...) your view of the markets. Looking at it in one linear fashion, with one linear philosophy is not gonna cut it.
