Bid!

The S&P5oo made a new post crash high, closing above 1414.  We’d like to make a small correction to our post this weekend on the S&P’s key levels,

1399.68– Thursday’s high.  Only a couple points higher, but a close move above this level will pave the way to test the 1414 recent high;

The S&P500 rallied big today on the back of Tiger Woods’  comeback victory at Bay Hill.  Or was it sovereign spread tightening in Europe?  Or the German business confidence number?

Didn’t the  Fed Chairman Bernanke make a statement today?

Is the current high level of long-term unemployment primarily the result of cyclical factors, such as insufficient aggregate demand, or of structural changes, such as a worsening mismatch between workers’ skills and employers’ requirements?  If cyclical factors predominate, then policies that support a broader economic recovery should be effective in addressing long-term unemployment as well; if the causes are structural, then other policy tools will be needed.  I will argue today that, while both cyclical and structural forces have doubtless contributed to the increase in long-term unemployment, the continued weakness in aggregate demand is likely the predominant factor.  Consequently, the Federal Reserve’s accommodative monetary policies, by providing support for demand and for the recovery, should help, over time, to reduce long-term unemployment as well.

We believe Mr. Bernanke is more wrong now than he was  about the housing bubble, by the way, and using cyclical policies to address structural problems will end in tears.  This isn’t the issue here, however, as we’re just trying to divine the market direction to put bread on the table.

Whatever the case,  this market didn’t need much of catalyst as it is clearly technically short, under owned, and lacks real sellers.    The Bernanke speech with a different technical backdrop could  have been a catalyst for a sell-off as the market may have perceived the Fed as being overly bearish on the economic outlook.

Nevertheless, we have noticed an interesting characteristic about this market since volatility collapsed after the ECB LTRO2 operation.   The S&P500′s ability to close above its open on a consistent basis has been impressive and is sign, at least to us, of a market that it technically short/under owned.

Take a look at the chart below, for example.   Over the past 60 trading days, the S&P5oo has closed higher than its open 40 days, or 67 percent of the time.   Rarely does any market give traders such an opportunity for abnormal profits — that is,  in this case, to buy the open and sell the close for a profit.

Since the early 1960′s,  the market has experienced such 40/60 streaks only 3.08 percent of the time.   What’s even more impressive about today’s market is the 40/60 run of higher closes than opens has continued for 21 of the past 23 days.  Stunning!

This seems to us there is much more firepower out there than most believe to drive U.S. equities higher.     We could be wrong and equities will remain bid until they aren’t,  but this is our observation.   Add it to your arsenal.  Hope it helps.