Newsgroup: it.economia.borsa
Titolo: Bull

BOULDER, Colo. (MarketWatch) -- Jim Morrison may have sung the song, but 
the "doors" I am about to talk about are of another nature...the doors 
to multi-year highs for the broad market.
Will the market push through? Time tells the tale, but all indications 
say 'yes.' The fences of resistance are weakening, given they have been 
pounced on several times this year; and most recently with the 
additional support of key indicators that I will speak to shortly.
While yearly resistance has yet to fall, when it does, the velocity of 
the rally will likely be fierce. Short squeezes and fearful buying from 
participants who fear missing a spectacular rally will ignite this next 
leg higher.
The historically bullish period during late October did not disappoint 
this year. The broad market has not just pushed through short term 
resistance levels, but has shown strength in key measures of the 
institutional market -- namely sentiment and confidence.
These indications come in the form of equity put-call ratios, 
advance/decline (breadth) and volatility. The confluence of these 
indicators is often a precursor to institutional money flow beyond the 
seasonally bullish time.
In terms of equity put-call ratios, we are now seeing the best 
indications of strength we have seen all year, indicating that 
institutional money flow could lead the way to breaking into multi-year 
highs. This is particularly valuable given that the advance/decline 
measure of the market has also shown little weakness in spite of the 
last few days of relatively flat results. Those are a sign that the 
market is taking a healthy breather. In terms of volatility, the market 
has settled into lower levels, but more importantly, more stable levels. 
This confluence of put-call ratio, advance/decline breadth and 
contracting volatility is a rare formation of strength for the market --  
one not to be ignored. Volatility (VIX: CBOE Volatility Index 
VIX12.80, -0.28, -2.1%) has been particularly valuable, given the new 
lows have created a bullish divergence, whereby the current market has 
yet to reflect the full extent of these lows. As long as the VIX remains 
below 13.50 to 14.00, and the other noted indicators remain positive, it 
looks as if the market is setting up what I call a "coiled spring." The 
release of this spring will occur upon clearing the next levels of 
resistance, which are now upon us, particularly with the Nasdaq 100 or 
QQQQs
Of course, we use stops to remind us that if price action works against 
our opinion. We follow the rule that states: It is best to lose your 
opinion before your money!
As stated last week (see Pivotal Times), we have come through an area of 
whipsaw, and while many people have been stopped out of positions for 
loses, including myself, this is precisely the time to view this 
condition as potential turning point. See previous column.
Those that bought fear in the face of wildly high volatility find 
themselves in a good position today, but caution is warranted.
Conviction requires one to let profits run once in a good position; yet 
the tendency after a period of volatility is to take profits too fast. 
This is a market-wide psychology that creates minor levels of 
resistance. We consider those who sell too soon after a strength period 
"weak holders" of long positions. These weak holders create supply 
(resistance), but are quickly cleared as institutional buying easily 
absorbs this much smaller group. As institutional confidence grows, as 
we are seeing from the indications noted above (and especially the 
confluence of several indicators), we expect this minor level of 
resistance to be cleared this time; as opposed to the previous failed 
moves throughout the year.
What disguises this resistance level is that it also coincides with 
multi-year resistance, therefore it would not surprise me to see 1320 or 
better for the S&Ps SPX1,220.65, +2.06, +0.2%) within the next few 
months. In the midterm, we see 1245 as the next key level to clear but 
not until we test 1223. If we cross this level, then we can expect 1230, 
1238, and then 1245. As we can see, these levels are condensed and 
tight, therefore, upon clearing each near-term level, we weaken the one 
that follows. This is how breakouts occur, so we must be particularity 
tolerant of minor selling or flat consolidation days such as seen 
Wednesday. These are normal and quite healthy.
In terms of the QQQQ's, we have a potentially an even more healthy 
situation, given we have already cleared short term levels of 
resistance. We can see the $40.30 level is already in jeopardy for the 
bears, which was Wednesday's high. At key multi-year levels such as 
this, one must maintain conviction and expect volatility to grow --yet 
as stated earlier, volatility has remained relatively low (below 13.50 
to 14 per the VIX). This is where the strong VIX signal comes form -- a 
bullish divergence essentially. While we would expect high volatility 
around multi-year resistance, we are not seeing that.
As long as we continue to see low volatility low, we have a strong 
chance for upside break-outs. Therefore, the benefit of any doubt 
belongs to the bulls.
Setting stops at 1205 for the S&Ps and $39.75 for the QQQQs would be 
prudent, and if these stops are triggered, cash is the position to be 
in. As far as shorts are concerned -- forget it. Unless you plan on day 
trading against the prevailing trend (a reasonable strategy for a market 
maker or professional trader) we see strength ahead in the absence of 
substantial deterioration. The bulls have the control and cash is the 
only place I would want to be if these stops are met, otherwise, 
maintain conviction and remain long.

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