March 5

We missed the rally since March 1. Our thinking of a decline from Feb 24 was wrong. But as the last post says, none of our indicators have flashed a sell signal yet. Stockwise, scrips like GOOG, GS are rallying all right but we don't understand the technical strength behind these moves. We don't recognize those patterns and so have not played them. There are still a few junk names like CBS, PERY, WGO which fit our setups. But we have missed them.

What next?

There is something very key going on here which we view as a trapping process. Stocks like GS which did not rally until feb 25 have caught up. Ones like AMZN which rallied earlier are not participating. There are very few technical setups in our scan of charts. Bears who went short around Feb 15 are being forced to "hedge" putting on risky long position. In other words, the tape is making people chase, but these are not technical setups. The chasing could take a while to complete. What is bearish would be volume cum breadth expansion accompanied with price contraction. This would mean larger (broad breadth) volume bars but smaller percentage up moves. This is what occurs when chasing happens. People just want to own a stock.

Bottomline:

We are setting up for a fall alright. We missed this rally but are not short either. It is only time before this chasing game turns sour. Our best guess at this point is for a down cycle to get hold by the 2nd week of march. If that occurs, we can have a bumpy april, may, june.