Well the markets are rallying again, and today's pitiful consumer confidence numbers did almost nothing to hurt the market's enthusiasm. A few weeks ago mainstream media were touting the head and shoulders pattern on the daily chart, and expecting the market to die hard, and what happened instead? The market staged a spectacular rally in the last week or so, making a higher high and a high for the year on the SPY. Now mainstream media is looking at the weekly chart of the SPY from November 2008 to this day, and touting how the chart is forming an inverted head and shoulders pattern, arguing for continued bullishness. The government is saying that life is good, green shoots are growing, and GS is making a prediction for 1150 on the SPX this year. (Remember when GS called for $200 oil last year?) All I can say is from failed moves comes a fast move (look at the rally that followed the failed head and shoulders pattern a few weeks ago). I wonder what will happen if the longer term inverted head and shoulders pattern fails? Notice in particular that the right shoulder comes on very weak volume, and it seems like the market is being propped up by buy programs. The fundamentals are terrible. Revenues are down but companies are making record profits from firing employees. Does anything exist to justify higher stock prices? Will profits still be expected to grow even as revenue shrinks?
Having said that, I don't think the markets are ready to die yet. Today's pullback, and perhaps a another pullback or two (to 95-96 on the SPY) would be healthy for a continuation of the bear market rally... perhaps to 102 on the SPY.
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