The first quarter of 2011 is in the books, and it was another good one for the bulls. After topping out in mid-February, it looked like we might finally see a correction, as we were hit with a number of negative news events such as the earthquake in Japan, nuclear plant fallout, a war in Libya and record high oil prices.
But once again, the market did what it has done so often over the past couple years and, after teetering on the brink of the abyss, jumped straight back up. The news flow wasn't all that great, including economic data and housing in particular, but it just hasn't mattered - POMO is too strong. We bit through the obvious resistance at 1300 on the S&P 500 and just kept running as the serial top-callers were badly abused by the market beast yet again.
The million-dollar question as the second quarter starts is whether we can keep this bounce going. We won't have window-dressing, which really helped this week, and after tomorrow, seasonality becomes more challenging. In addition, we are still technically extended, and we have a couple weeks before first-quarter earnings reports start to hit. There aren't a lot of obvious catalysts on the horizon, but good news, bad news and no news seem to be equally good excuses for some buying lately. Nonetheless, we can't be too sanguine about the possibility of some consolidation after the run we have had over the past couple weeks.