Europe Lays Down Groundwork
The market rose again yesterday, and the bulls looked good. Buyers built on Tuesday's momentum, where they protected 1100 and 1115 support, and were able to rally SPX back over 1131 to within one percent of 1155 resistance. Volume was good during the advance and technology stocks (as well as small caps) led the bullish charge higher.
Today is another big day in the market, and the bulls clearly have the momentum. The Bank of England announced QE2 this morning, which has European indices jacked. The program announced by England central bankers is not as robust as Bennie and the Feds QE2, but the news was mostly unexpected and not priced into most stocks, especially the European banks.
Unfortunately, the ECB kept its interest rate steady. I had thought the ECB would surprise us today and announce a cut to interest rates. The ECB, however, did lay the groundwork for future interest rate cuts, which the market should likely hear.
The bulls owned action internationally today and our six long positions are looking good ahead of the open. Asian indices were in full recovery mode, with most up 1.5%, but Hong Kong was up 5 percent. The European indices are also juiced this morning, with most up two percent.
I continue to favor another push higher for the U.S. indices, after they recover from last week's bearish onslaught. But we can't get greedy here folks, and we also have to keep in mind 1175 could act as a major resistance zone.
Accordingly, I have increased all stops. In fact, I increased our stops so much, that it's likely every trade will be stopped out this week.
Basically my line of thought is this: if the bulls are going to find resistance at 1175, and the indices turn lower, we want to be out of all longs; but if the SPX is going to rally hard, there's a good chance the stops will not be triggered and our stocks rally hard for another three days (or more) too. So we can either lock in small gains (4-5%) or we can squeeze out 15% gains should the market blast higher.
