Bulls go crazy

The markets had strong moves higher today as Bulls continues to run through the Bears. We have had a nice move prolonged by shorts covering and reshorting. Although I must admit I have been skeptical of this entire move, I was open to the possibility that this move would occur and have been sticking mostly to the long side. Here is a quote from my July 18, 2006 post.

"Here is a chart of the SP500. Nice candle today confirming support. This level was confirmed as support on the last downturn, so it makes the candle more significant. While I'm not crazy enough to call it, it looks like there is a possibility that the SP500 could form a reverse head and shoulders as marked on the chart. This would be an interesting development if the pattern came to fruition as the short covering would be frenzied (maybe fed pause ;). "

Chart Here

I was thinking that if such a move occurred, the majority would be looking to short each rally. If everyone is trying to short, then it may keep chugging along. I figured the end would come as soon as everyone threw in their short towels and started debating whether this time was different. We're not there yet, but I feel people getting bullish, as non trading co-workers are asking me about this rally and if it's too late. I wasn't foolish enough to call a bottom back then, and I'm not foolish enough to do the same with a top. There has been a lot of strength in the markets recently and it seems that every short position I put on is a small win or loss no matter how good the setup. I would imagine that a top would probably drag out a little as there are still plenty of people that think they missed the bus waiting in the shadows.

On another note, I found it a little perplexing that the indices finished with above average volume, but the ETF's volume was very low. Take a look at an $spx chart and compare the volume to the SPY chart. Same with the Q's. I have no idea what this means other then maybe less program trading today? Another thing that has me a little perplexed is that in a normal cycle, stocks peak before commodities. With stocks making a new high and commodities looking like they topped out, I wonder if there is something else at work here or if commodities have another move left in them as well. Maybe there are clues here for a possible major reversal in the US dollar. Just thinking out loud here, but this market has had some strange behavior to say the least. One thing is for sure, if you love this game, there is always something interesting going on.

No charts tonight, but I may post a few intraday tomorrow.

Good Luck,

DT