Wednesday, July 15, 2009
The dog that didn't bark
Here is an hourly chart of the e-mini day session for the past six weeks. The rally from Monday morning's early low has been almost uncorrected - a very unusual show of strength. In my judgment the Goldman Sachs and Intel earnings reports were not by themselves enough to push the market up like this in normal circumstances. But circumstances are not normal. There is a very large investment crowd that is betting that this market will go a lot lower because the economy is deteriorating. The earnings news has put a small hole in that particular balloon - the economy may in fact not be deteriorating. And so many are so under invested that it doesn't take much to scare them back into the market. I think there is much more portfolio reinvestment to come as bears gradually give up the ghost. This market is headed much higher.