The Bull Beat Goes On

With yesterday's float higher and early indications pointing more buying at the open, equity markets simply continue to rally without pause.  To be sure, solid earnings from Alcoa have raised the optimism for Q4 earnings reports and generally lifted the mood of investors for the time being.  Surprisingly, though, the concerns about Europe, which dominated the marketplace as recently as Monday, have largely moved to the background despite the unresolved status of the issue.  This is just another case in point of an equity market that wants to move higher despite negativity of any sort.  Having been firmly camped with the bears for the past several months, I can't help by shake my head at this relentless move higher since there are real fundamental issues that are not being discounted in share prices.  This is why applying rational thought to inherently irrational markets is always a risky proposition.  Sooner or later, though, the chickens will come home to roost.  It's just a matter of time.  And as I've mentioned previously, I like the intermediate story associated with equity as earnings have held up better than I expected.  However, the near-vertical nature of the current move coupled with fairly rich valuations is keeping me on the sidelines for now as I wait for a more attractive entry point.  To be fair, I've been waiting for several months for this opportunity without success.  But just because I missed this latest move doesn't mean that rushing in and buying shares in an effort to chase return is a worthwhile endeavor.  In fact, I suspect many institutional and individual investors are doing this very thing, which is driving this latest leg of the rally.  If truly the case, this is a recipe for disaster as buying will prove to have been based largely on momentum rather than underlying fundamentals.

For the rest of the session, keep an eye on the 1,280 level on the S&P 500.  This has been a fairly significant resistance point for the index over the past week or so and a break through here would open the door for a another leg up.  However, with momentum indicators suggesting that the major indexes are sitting in a fairly overbought condition, I would suspect 1,280 to hold once again.  We'll see soon enough.  Outside of the equity world, I'll continue to watch gold, the U.S. Dollar, and crude for signs of investor rotation.  All have been resilient of late, with crude catching a fairly sharp bid due to the Alaska pipeline shutdown and the wave of cold air passing through the northeast portion of the country.  However, both events should be resolved fairly quickly, so I would suspect to see a resumption of the drift lower in prices that was seen late last week.

Until later.....