The markets keep on keeping on, but volume and breadth are decidedly lackluster underscoring the probability that this is a bear market rally. The Qs should encounter resistance around 50.50 to 51.00 where the gap from 1/3/08 would be filled. The DJIA is heading toward resistance at 13,250. The SMH is approaching its upper parallel channel line. And the DJTA will probably make new all-time highs. The XLF may still have some upside to around 30. The XHB looks to be ready to break out.
Is this the time to be increasing long positions? In general, no. This rally has been going on for almost two months and we are in the time zone for seasonal reversals while most indices are approaching resistance. The DJTA may double top or at least pullback at the all time high. The XLF and the XHB may hold up or consolidate as the the other indices correct, however. In other words, this is the time to be scaling out of positions as we approach a cycle high period around May 16 to 19. One should always keep in mind the monthly anniversaries of significant highs and lows as potential turn dates. In this case we might see a high around the above dates in May and a low around June 17. Of course, price is the ultimate determinant, but it is helpful to have an idea of what potentials exist.
An interesting pattern has developed in JP Morgan, JPM. I will discuss it tomorrow night.
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