Bullish

It was the sort of Monday action we've seen quite often since the low in March 2009. Not only did we gap up substantially to start the day, but we kept on running and finished near the highs. Breadth was quite good, with better than four advancers for each decliner, and all major sectors -- except for gold mining -- were positive. We also had light volume, another theme that has been quite persistent when we have positive action.

We had some impressive gains in the indices, but under the surface, we didn't have the sort of wild momentum you'd expect to see when the market jumps and runs all day. There weren't a lot of big green bars and very few pockets of extreme strength. The gains were well distributed throughout the market and had the look and feel of broad-based buying without much attention to individual stock selection. Once again, it was a market that rewarded directional bets much more than it did individual stock selection, but that is what happens when ETFs and computers are in control.

Technically, the S&P500 and DJIA are leading, as they attack the highs we hit back in June. The Nasdaq and small caps are lagging and have yet to exceed the July highs. The low volume is theoretically a negative, but as a practical matter, it has not had much influence in this market. Again, that is probably due to the influence of ETFs and computers.

The first day of a new month and a new week have had a strong tendency toward positive action. Further upside becomes much more challenging after that. Nonetheless, the bulls do have some momentum here and have obviously caught shorts and underinvested bulls by surprise yet again.