Mood Swings Back to Giddy


"The mother of all bear rallies wafted to within easy distance Friday."

The mother of all bear rallies wafted to within easy distance on Friday of re-energizing a bull trend that had seemed unstoppable until last spring. Then, buyers who had driven the broad averages higher for 14 months at an unsustainable, 45-degree pitch turned, sending stocks into a 1000-point sine wave that for four months has defied easy categorization as either a consolidation or distribution. However, bulls will have a chance to take charge unambiguously Monday when stocks begin to trade, since it would take a mere 60-point rally, to 10921, by Tuesday's close to turn the Dow's daily chart decisively bullish. We should note that that wouldn't quite clinch the bullish case for the longer-term, however, since a 1,000-point rally to at least 11868 is needed.

Last week's dramatic liftoff was brought on by the usual suspects, including: 1) the virtual absence of sellers in a market that has been driven 99% by computer-trading and institutional prop desks; 2) a sufficient quantity of aggressively spun but, ultimately, meaningless "good" news to drive short-squeeze buying through key resistance; 3) a helping hand from opportunistic buying of U.S. index-futures in illiquid, overnight markets; and 4) a mood-driven window of opportunity for the talking-head world to interpret whatever news hit the tape as bullish.

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