Yesterday’s Stock market rally arrived right on schedule. Actually it was the most anticipated “bear market rally” in the history of the stock market. This of course leads one to be suspect on whether this rally has any staying power. the main thing to watch is the volume. As it begins to decline so will the advance. For the past several months the Bears have had it easy as they have not had to deal with the market moving against them. From that perspective the trade of being short the Stock Market was becoming a little one sided as was the opposite fear trade of being long Gold or US Treasury Bonds.
Going forward expect some follow through on the upside for the Stock Market and will continue to be lightly long with a tight double stop that would take us out of long position and reverse us to a short. We believe that regardless of how the future unfolds a test of the low is somewhere in the markets future. We should add hat we believe it might be the near futures as the Bears are well capitalized and a capitulation sell off would finally shake out the final group of buy and hold believers.