It ended up being a pretty flat day, but the IWM is now up 18 of the last 20 days and we are still extremely overbought. Just about everyone agrees that this market could use a little rest ... which is probably the main reason that we aren't getting it. Although the major indices were slightly red and volume was light once again, we still had good breadth and little notable weakness. The dollar bounced back intraday, which put a little pressure on gold and oil but steel, homebuilders, retail and technology stocks offset weakness. So once again we are in this position that we found ourselves in many times last year: We have gone straight up on light volume, have cut through resistance with barely a pause and are technically overbought but we are showing no signs of weakness. The easiest thing in the world to do here is to look for some weakness or profit-taking, but that has been the easiest thing to do for a week now.
Sooner or later we will pull back, but a lot of bears have already gotten in deep trouble by jumping in too early. Many bears see the China stocks providing some good opportunities, but until we actually see some selling they're not pressing the dark side. Shorts may look to hit the CSCO news, but I'm not so sure they'll be successful......
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