We are having breakouts on most indices with solid internals and yet there's so much disbelief. I think this whole disbelief in the rally stems out from the fact that the majority are now looking for the 4-year cycle bottom in 2006, which is a very widely publicized event. The wide acceptance and positioning for this event makes it a slim probability occurence now. Look what happened to the much publicized 80-week cycle bottom that was furiously discussed last week.
Instead of asking why the market is rallying in face of the current fundamentals or why it shoudn't be rallying as theorized by the market letter writers, one has to look at what the internals are suggesting.
Take a look at the above chart of NYSE. Price has clearly broken out of the wedge that so many have been discussing. This whole wedge theory has been clearly invalidated at least on the NYSE. I noted a month back on this blog why the wedge theory is bogus, given the interrelationship between the the different wave components in the wedge, which doesn't confirm to the Ending diagonal requirements.
The 5% and the 10% components of the MCO have already taken out the Nov 2005 highs. The NYSE MCO is close to taking out the Nov 2005 highs. If this happens then the bears looking for an intermediate or a long term top will be dissapointed here. The summation index has formed a ledge and is now moving higher, which is again a very bullish sign. I don't see any reasons to get bearish in the face of such solid internals. In fact such bearishness here can only lead to one heck of a rally. The system is awash with unprecedented liquidity and don't fight it.
The Hourly/Daily/Weekly/Monthly trends are all up. In the VST we are very overextended. So, we may get a small pullback starting Monday, but every pullback is a buying opportunity at this stage until the current technicals/trend change.
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