From the get-go buyers were out in full force scooping up shares. The S&P 500 and NASDAQ had big price gains and volume coming in to confirm a new market rally. There was much to cheer about this one day wonder, but do not get overly giddy. Remember, June first saw the May 31st follow-through day go up in flames. However, we are also coming off some serious selling over the past month and a half, a rally here is not a surprise to us. We are going to operate on the long side with today’s confirmed rally, but know this will not last very long.
There is one instance where a June follow-through day actually worked. While we do expect a bounce here back up into the 50 day moving average a rip roaring new bull market we are not. Sentiment the past two weeks have been uber-bearish. The crowd got awfully bearish in a hurry, a sign we are short-term oversold. Last week the spike in the VIX, although not severe was a sign of selling exhaustion. If there was a bit more capitulation I would be more inclined to think this market has a better probability of moving higher. Unfortunately, we do not have the proper conditions for a new bull market rally. With that said, a few long opportunities have taken place and we are going to take advantage.
The talking heads on CNBC are talking about the potential parliament vote in Greece to spur a market rally. Perhaps it will or it could be the conclusion of the FOMC meeting tomorrow that will provide clarity on a possible Federal Reserve move in the coming weeks. QE 2 is set to end next week and the market is trying to figure out what do from here. Will second quarter earnings be enough to propel the market higher? For now, we have a confirmed rally and we are going to get long. We are, however, will be quick to take profits and not leave our positions with a lot of “slack.” As usual, we will be quick to cut losses to protect our back side.
Let’s see how the market behaves here and how it digests tomorrow’s news flow. Do not be a hero in this market.
