Jack's Wrap - Lateral Into Jobs....

The market that just won't fall didn't again today even though it should. Should is a tough word in this bull market because what it should be doing and what it is actually doing are quite different. It should be pulling back to unwind some negative divergences on the daily chart and because the oscillators from MACD to RSI to stochastics all need to rest. It's not happening. The market is holding up now, in all likelihood, due to end of quarter buying and because few shorts want to step in front on Friday's jobs report. Fear of a blowout report that will spark another rally higher to make the oscillators that much more ridiculous. All that can be said with certainty is that for the moment the market won't sell and no one knows when this market will finally take it on the chin to cool things off. It'll happen but it seems as if it's going to wait until after the jobs report.

We started the day with a small move up and then followed a very familiar script for the rest of the day. The bears made token efforts to bring it down, but as usual, their efforts failed miserably. On occasion they were able to bring the market in to the red across the board but that lasted all of about five to ten minutes. As usual there was late buying as the shorts gave up and stepped aside. As usual we closed higher and near or at the highs. You have to feel for those who have continually been on the wrong side of this bull market run. The fact that markets go up far more then they go down is tough enough on the bears, but when a real bull takes hold, it has to be infuriating to be a bear. Just never get satisfaction. This market continues to ignore overbought and some negative divergences day after day and today was no different.

All of what I just talked about will have a price to pay and you don't want to be overly invested when that day hits because the masses will be waiting for the usual reversal that won't come. It won't mean the end of the bull as it will simply be the selling the market needs. However, if you're overly invested the selling will scare you and force you to make emotional decisions you'll probably regret in the long run. If you're not overly invested you're more likely to do the right thing and buy the weakness. Something you wouldn't do in all probability if you're under water too many plays. Again, we see emotion taking hold if the selling gets more intense than you think possible. If you are decently long you need to be sure you're in the best set-ups and in plays not overbought. They'll hold up the best and take away some of the angst that goes along with all selling episodes.

Today we saw the same old game played in the land of rotation. The banks and financials were particularly weak but many other areas of the market held up extremely well. This has been the story as we know from day one of this bull. No matter how hard the bears attack a particular area there is money flowing in somewhere else to more than make up for whatever the bears can dish out. As one sector gets very overbought and sells, the cycle of another area that got oversold gets bought up. Oversold never stays that way very long thus if a sector gets hit hard, before you know it, the buyers come back in. Wash, rinse and repeat over and over and over again.

The story is old and somewhat boring and I get that. You need to have exposure. No one would argue with that for sure. If we didn't play at overbought we would have missed at least the last ten winning plays. Set-ups can be bought. It's amazing to watch these handles take shape and ultimately move up, even if it's not the best day in the market. Only when these handles finally fail can we safely say the correction we need is upon us. Until then we stay with what's working but we do so with great care to be sure we're in the best possible set-ups.

Peace,

Jack

The retail sector Retail Holders (RTH) seen on today’s chart shows that after a strong run it’s quite extended and needs a breather soon.