Rev Shark Blog
Nice Job Patching Things Up Technically
By Rev Shark
8/16/2006 5:18 PM EDT
The bulls caught the "sell the strength" bears by surprise yesterday when the market failed to reverse after a strong open. The bulls continued to press today, squeezing shorts even more and causing the underinvested to scramble for some long exposure.
Breadth was good, the point gain big and volume even increased a little. Volume could be better, but it isn't so low to be a major negative.
There is no question that a lot of folks were caught leaning the wrong way the last couple days, and now we have to consider how much longer the bulls can keep them on the run. Obviously, the bulls have seized the edge and can make life quite uncomfortable for shorts and the underinvested if they continue to aggressively buy minor pullbacks.
We certainly have done a nice job in fixing the weak technical pattern in the indices, but so many are starved for gains I am concerned that we could really see a fast reversal if profit-taking starts to emerge. There are some good recent gains to protect and many folks will loathe giving any of them back.
Another issue that concerns me a bit is seasonality. If this move had started in October, it would have much better cash inflows to support it. Unfortunately, we are now entering the weakest time of the year for the market, and that is going to make it tougher to keep this move going.
After the close, Hewlett-Packard (HPQ) had a knockout report and is trading higher by close to $2. The stock had already made a big move recently and it is ripe for a "sell the news" reaction. Keep an eye on the action here; it will be a good tell for the broader market. If it holds this gain, that bodes well. I hope you had a good day and were able to lock in some profits.
