There Is No Market Top- The Week Ahead – Tues March 5 2013

I took a lot of time this weekend to step back and really take a look at what was happening here in the equities market. All the time I’ve spent learning japanese candlesticks, fibonacci retracements, bollinger bands, commodity correlations…all that jazz… all of these are just tools for entry and exit. What REALLY matters most in developing a successful trading strategy is the strength and direction of underlying momentum. Although current momentum is overwhelmingly bullish,  I really thought last week was going to be the beginning of a meaningful correction, then the rally to new highs. But in order for any correction to happen that would mean a need for institutional investors to sell…and who in their right mind would sell this chart?

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What I was expecting last week was a complete reversal in momentum, and markets simply don’t work like that. With the strong bullish momentum we see today, we would first need proof of a halt in this bull’s vigor in order to call any market top. Last week’s volatility and low volume was not a halt in momentum but rather the market going, “Hold on, can we really do this? Can we really rally this high, this fast?” And Uncle Ben was there to console her and answer with 3 speeches “Yes, my dear. Relax and take your QE3..” 

This bull is renewed after its meditation last week. I bought to open SPY calls this morning because, quite simply, there is no risk involved. There is nothing really going on to stop this rally this week. Potential ECB rate cuts and Friday’s manipulated jobs report should keep this bull raging until the end of the week. 

Many are calling a top at SPY 155.85 which was the 2007 top..but this is not 2007. This is 2013, and the world is desperate for a U.S. recovery. Bernanke is the global market’s elected Superman and he is using every trick in the book to push this market higher. Ladies and gentleman, he is winning. Global investors are flocking to the U.S. equities markets because there is nowhere else to go. We are it. And this alone is enough to break through 2007 highs. Buyers > Sellers.

The Best Summary of The Week – Fri March 1 2013

1) NEVER SHORT THE MARKET WHEN BERNANKE MAKES 3 SPEECHES IN ONE WEEK. 

2) Any bearish sequester effects can only take place if mainstream media plasters it as a “doom and gloom” situation for a few days. Perhaps over the weekend.

3) This primary bull market is extremely, extremely strong. I am beginning to think it is possible we break through the multi-year triple top on SPY by early April (thanks Uncle Ben). 

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Congrats, bulls. Ben had your back this week.

The next two weeks, however, will be volatile as we are strongly setup for some consolidation.

Next week, options open interest is highest in the SPY 150 puts and 148 puts. Pretty bearish. Also in recent weeks, Green Fridays have mostly brought Red Mondays. We’ll have to see what happens over the weekend to make any attempt to figure out Monday’s move.

Happy Sequester Day