There are some phenomenal rallies that can occur during a bear market and we are in the best one since the bear began in October of 2007. No matter how far this goes, and I think it's going higher, this will end and we will go back down over time. This process should take years. This is not going to just be over. Not one bit. This has a lot more work left to do before we can call it a day. My best guess is another 3 years at least. Could be several more than that. However, we don't care about that. All that really matters in the long run is being on the right side of the market the majority of the time in order to make a few dollars. Bear markets and bull markets are really the same beast. It's only those who will play one way who care. Those are the ones who are trapped. Those are the ones who have to remain in a "perma" mode and that is truly unfortunate. Today (Friday) feels like this bull market run has ended. It hasn't. That doesn't mean it won't need more time to go sideways and unwind some very overbought 60's and daily's. We've had a strong run and sometimes we just need to pause to refresh before continuing along the road established. The trend is higher. Bear market rallies also have selling episodes and we just have to accept that and not get too emotional. Nothing took place today that suggest something bad just began. Some leaders have had a strong run and they made need time to handle out before trying higher prices again. Stocks like Apple (AAPL) and Baidu (BIDU), to name a few, have really run and why not rest. Like any index, they too need to rest from very overbought during the journey from overall selling to overall buying. Their down trends have ended but you can't expect them to just go up dollars every single day. The market makers will need supply, etc. all a process. Today we gapped down at the open and never really looked back. It was a trend down day with few periods of any significant buying. The bulls knew they needed to let things rest and thus never pushed on the gas. The advance decline line was three to one negative and that's to be expected when a real selling bout is necessary to unwind things. However, and most importantly, volume was 500 million plus less today than yesterday's buying. That's a huge number. Still no red flags on the internals, even on the nastiest down days on price. Yes, no fun at all but you have to delve deeper to see if anything has changed and it has not to this point.
Leaders gapped down tired after a long run and that usually means things are going to need a little bit of a longer rest. Maybe we just handle out back and forth for a few days. It is important to look at leading stocks on a high pole and recognize that their selling will allow all the overbought index charts to truly unwind and that's great news. That'll allow for the next attempt higher. If that move up is very weak, then we have a change of character that will have to be noted and acted upon. You can't try to predict things like that. I think things are setting up for another move higher once the leaders catch their collective breath.
The Vix saved itself once again from breaking down and seems determined to hang in there above 40 no matter how high this market goes. It gets real close but just won't lose that 40 support zone. You have to respect that for now. If it would break that would be very bullish in terms of this market extending a lot further than most expect before this rally would end. The good news is its still trading below the 200 day simple moving average at 41..51 and didn't exactly blast up today. A very weak upward move. If that is the story until the market finishes selling, then there's hope for a breakdown. The next few days will be critical, especially if the selling continues further to unwind things.
Key support on the 50's need to hold as the selling takes place. The bulls need to continue to take a stand as they did the other day with the Sp and hold the fort. Let's look at the numbers. The Dow has the 50 day sma/ema are at 7597/7638. The Sp has those levels at 791/797 and the Nas at 1463/1476. they can breach some but the key is to reverse and go right back above.
So today was painful and some stocks we have took hits. hey, if you're expecting perfection in the hardest game on planet earth, you're in the wrong place. The record speaks for itself thus no apologies. Deal with the bad days when they happen. Won't be the last time. Hundreds more to come. If you play this game you have to have the right frame of mind going in and understand the way things work. Here's something very important to consider regarding this rally. if you study the Dow volume on this months monthly chart you will see it's the largest volume ever. This is the reversal positive month thus I continue to hold a bullish bias. Holding over 7500 would be a huge positive for this market with the volume that has poured in. Hang in there and deal with the bad days. I think the rally has more to go, even if we go nowhere for some days or even weeks.
