The S&P index has yet to hit the 50 day MA which a lot of institutions monitor. Yesterday's candlestick left a nice buying tail which suggests further upside, but on the overnight chart, there is a double top. There could be some backing and filling as the market digests the rally, but I still anticipate slightly higher prices.
I did buy a little short protection this morning with the SPXU. I'll add if we get higher.
There is also the possibility that the S&P is forming and expanded triangle or megaphone top. Doing so would call for price to reach the upper trend line, possibly the 1308 area.
As a bear, I like this possibility. Megaphone tops are a symbol of a market out of control. They are quite bearish. Once the upper trend line was reached, the next target would be another test of the lower trend line -- a considerable swing that could bring us down into the 1220s.
In Elliott terms, a new low would complete wave 1 down and call for another blast higher in wave 2 then a sharp decline possibly below 1000. Regardless of what occurs, volatility would be back, and we'd have a trader's market again.
No matter what happens, and even if you're a screaming bull, realize one thing and keep it in the back of your mind at all times, and that is that for all the stimulus and QE and TARP and government intervention, there has been nothing done to address the structural health of the banking system other than to buy it time. The piper will still have to be paid.
That is why I remain a structural bear, but also a nimble one.
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