We said several weeks back that it was hard to see the market top when bullish sentiment surveys were so neutral. Additionally we cited that tops were usually met with exuberant buyers not traders salivating to put on shorts. So here we are several weeks later and two indices: the NASDAQ Composite and the Russell 2000 are both at new post market low highs. When the NASDAQ and Russell 2000 are both making highs it again is hard not to maintain a bullish bias.
Given the market has rallied nearly 10 % in the last few weeks expect a shallow to moderate pullback to occur, however we believe these pullbacks will be buying opportunities.
The economic calendar will remain volatile as investors over interpret every release, however by and large we believe the economic recovery track will continue on its course and this will cause the final lot of sideline monies that have been reluctant to finally join the party. Only when all liquidity is exhausted and all the buyers are all in will this move likely end. Our guess is this will occur somewhere in the rage of S&P 500 1,200 to 1,300.
So for now weakness appears to be an opportunity to buy stocks, especially in the areas that are working, technology and small cap.
-Kevin Lane, Fusion Analytics