Tuesday, February 16, 2016

S&P Balloon Under Water

It is like trying to hold a balloon underwater.  This S&P when it is under 1880.  The huge buy programs out of the blue last week at key technical points in the charts was  PPT like.

The buying forces are resilient, even as you saw the savage selling in Nikkei and Eurostoxx.  Reinforcing the theme that the SPX is the equivalent of a battleship compared to the dinghys and sailboats that are the Nikkei, Eurostoxx, and Shanghai.  It will take the equivalent of a thermonuclear bomb to destroy the SPX, while a little scud missile can take down Japan and Europe.  A 22 caliber can take down Shanghai.

Even after the huge up day on Friday, you are getting follow through buying in the form of a massive gap up.  These are not common.  Usually after a 2% up day, you see a consolidation day the follow day, not a 1.5% gap up.  And it comes after the climactic selling on Thursday that tested the SPX 1812 bottom from January 20.  Extremely bullish price action.

Apparently there was a secret meeting that was quite well publicized between Saudi and Russia.  The production freeze is a huge disappointment.  That takes away a huge catalyst for crude oil, as the shorts' biggest fear, the OPEC production cut, is now taken off the table for quite a while.  It is now going to be a free fire zone for crude oil shorts who will get bolder.  That doesn't make me bearish on stocks, because I believe there will be divergence as equities grind higher as crude oil stagnates.

For the day, expect a little selling off the big gap up open but don't expect much.  Eventually we should test the S&P 1920 area before this rally takes a break.  I will stay long till that point.

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