Stocks Trading Near Upper bands

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The S&P is trading around its upper band. I think it moves higher and hits the orange band at 1293. I think it gets to 1275 before pulling back. The S&P has closed at the same place the last 3 days, which is very bullish. If I were short I would be nervous. The squeeze has lost momentum. This is typically when some of the best reversals happen. Also, the average true range right now is 30. Keep this in mind if you are swing trading.

Transports continue to lead the market. As long as they go higher, the market will not go down. I think we are getting close to a point where the market needs to pullback. Look for a volitile, choppy day on Monday followed by a push higher on Tuesday. Then start getting cautious. The world situation, no matter how disastrous, is insignificant. What matters is the perception of risk. Hedge funds care not about what is going on in the world but about taking on risk. They know Quantitative Easing will push asset prices higher, and are preparing for this by getting long.

A surprising bounce in T-notes. Is the bond market going to fire off a short squeeze, or a long squeeze followed by higher highs? I think bonds and t-notes are about to make all time highs. I think the end of January and beginning of February marks a top in the bond market. From there I think long-term rates will have bottomed and start a slow but steady creep higher, pushing down bonds. This means inflation overtakes deflation as the biggest concern. It also means Quantitative Easing will continue to grow. The only way world governments are going to save their butts right now is by printing hoards of cash.

Gold is lagging the stock market. While I think it goes higher, I would rather be in a leading market.

Crude oil has been very strong. It also has a squeeze setting up. This could provide an interesting move for next week.

With the squeeze over, Wheat could get a move back to its lower band, or 648. On the whole, grains are a do-nothing market right now.

The Dollar is going higher. There are two reasons for this. First, in the midst of uncertainty, investors with big money seek liquidity. Secondly, the fiat currency backed by the strongest economy always wins, no matter how much debt that economy has. I think the dollar could go higher into April or May, sending the Euro lower. AUD has begun moving more with general asset classes including the dollar.

Though quiet, the Canadian Dollar has moved to its upper band and is worth a short.

AAPL continues to lead the charge but is sitting at resistance. PCLN struggled on Friday. Third tier tech stocks like this are not leading the way. A phenomenal move in GOOG, which has climbed into short covering territory, a good sign for the Nasdaq. At some point I expect a short covering rally in NFLX. But nothing yet. VISA and Mastercard continue to trade well but are extended.

Asset classes remain tied together. If the S&P goes to 1275, it means a broad class of other assets will scramble higher with it. Governments of the world do not want their countries to collapse. They want to stay in power, even at the cost of printing money. Therefore Europe will not collapse; instead it will print money and continue to operate in a highly leveraged way.

There are a few available slots for the January 5-6 seminar in Park City, Utah with Rob, Hubert and me. Live trading, teaching and skiing. The Chicago seminar is March 26-29. Call the office for an early bird special. Next week's mentorship is sold out, but the March 5-8 session still has available seats.

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