Bears Foiled Again
The market stumbled higher yesterday in yet another drop at the open but rebound by the close-themed session. And the bulls ran SPX right up to within a point of 1355 resistance. Volume picked up from earlier sessions this week but it remained unseasonably low.
Yesterday's appearance of low volume is not unusual, but that's only because we haven't had high volume since November. Rallies that make new swing highs almost always come accompanied with high volume.
Only the Nasdaq Index had average volume yesterday. And the "good" volume from the Nasdaq was directly connected to the massive move by Apple (Nasdaq: AAPL).
Yesterday, various technology blogs announced that AAPL would have a release date for the iPad 3 in March. The iPad 3 news from the bloggers was enough to send AAPL shares 3.4% higher on a daily volume of 31.3 billion.
Apple could have room to run higher this year. But I think a pullback to $473 is likely next week and ultimately $431 will be tested again.
Aside from the Nasdaq yesterday, the low volume has made this recent rally challenging for traders. Many analysts and traders look at prices over the past week and say, "Wow, this is one strong bull." While I have been a major proponent of the rally from the start (literally, we were loaded with long positions on Oct. 4), I wouldn't call the bulls' recent effort impressive. I think a better description would be to say, "Wow, this is one pathetic display of sellers."
The bulls have made raising price look easy because bears have been absent for the past two months (three if you count November). The lack of volume indicates to me that there has been a disappearance of sellers.
But we all know that sellers come back in a rush and when they do it's usually vicious. This latest rally has been difficult for traders because they know that when the bears enter the fray, selling pressure will destroy the low-volume buyers.
Another concern that I carry is that the bulls are never going to ease up on the throttle. The bulls could be relentless and take prices higher through the month without pullback. If that were to happen, look out below.
Chances are highly likely that if the bulls don't let the market consolidate over the next week, the next pullback will be the beginning of a gigantic decline. For now, let's expect the most likely outcome, that a pullback will start before Wednesday.
By the way, next week I will be hosting a FREE live online event on February 15, 7:00 p.m., "What You Should Do if you've Missed the Rally of 2012." If you're interested in participating in this FREE live event, sign up today! And don't hesitate, these live events typically overbook pretty quickly. Click here now to register for this free event - and to secure your spot.
