S&P 500

Here is the trade I currently have on for the S&P 500. As you can see it is a short position. I am bigger picture bullish, but that does not mean that short term sell signals cannot be taken. The recent COT report did show heavy long positions on this recent rally, which is very bullish larger picture for the market.

I do view any pullbacks as buying opportunities and I think those that are waiting for the big selloff are going to have to wait until the end of the summer. Predicting is a difficult undertaking for anyone, but that is how I see it at the moment.

This trade will be exited shortly as it is a short term trade and appears to be headed for a profit.

S&P 500

I posted a couple of weeks ago there was possible trouble due to weak bonds. As we can see, there has been some short term strength that has entered that market. This was the lone remaining shortcoming of the rally off the lows, that has now been resolved. I am aggressively long stocks from a couple of weeks back, when the short term trend down trend of bonds broke. I was waiting for a pullback, but decided based on the strong seasonal pattern, to pull the trigger and just add to my positions on any pullbacks.

I was concerned that the breakout that was brewing due to the small ranges I mentioned, would happen upward, and I did not want to miss it. We also have the commercials on the long side as well. We are hugging the 2.0 standard deviation band on the high side, which tends to happen during strong trend moves. This does tell us that we are short term overbought, but I would view dips as a buying opportunity for now.

We do have to keep a close eye on the bond market, which is showing some weakness as I type this. If we were to get a big drop there, it will undermine this rally at some point.

CRUDE OIL

For those of you that get my newsletter, the Crude Oil trade is summarized to the left. I had said to short it on 4/2/07 and exit when the percent R closed under 25. The entry was 65.10 and the exit was 62.01, a profit of $3.09/barrel. This yielded $3,090 per contract so I hope some of you did this trade. Things rarely line up as perfectly as that one did, so the trades have to be taken when they do.

STOCKS

Here is how we look on 4/11/07. Once again the resiliency of this election rally has asserted itself. My long term indicators have never gone away from the long side, so they indicate to still be long. We do have some possible trouble brewing with the Bond Market.

The Blue Line marks 30 yr Bonds, and as you can see, this market has had a sharp move down in the last 30 days. This happened while stocks rose nicely during this same period. These types of divergences often spell trouble for stocks. We are in the early stages of this divergence, but it is probably not a time for an aggressive long position without a pullback in price first.

Also note how the average daily range is getting quite small, indicating very little volatility. Generally, these conditions lead to breakouts in price, one way or the other. The commercials are still heavily long this market, so that is a positive. I am looking to enter this market on the long side aggressively, but not without some type of a pullback first.