Markets Defy all the Odds... Start to Move up Again

On July 1st, I tweeted that we had hit a possible low on oversold conditions and that markets should rally from that point for the summer before we go lower. Well the market hasn't disappointed and has made me look pretty good to date. :) At certain points I have said that we will go higher, slowly talking it up. The following week I wrote that they would continue to rise and they proceeded to blow through the 50MA rising right to the 100/200MA area where they currently sit. I am not sure if I gave a definitive target but 10,600 was where I expected next resistance.

I strongly believe that conditions are now set for the markets to take another jump up. In fact, they may even get to new 2010 highs, believe it or not. There are technically 2 targets now, one just under 10,900 and the other around 11,200 and if both targets get hit and taken out technically, the market could push higher possibly making a the head in a head and shoulders formation but that is way to far off to correctly predict. I have heard of the double top scenario, but I would suggest with continued beats and strong earnings that will give markets momentum to blow past that number around 11,200. At this point I think that is where the herd gets sucked in b/c headlines from Q2 earnings say everything is rosy and massaged economic data this fall will follow the positive earnings.

I am not sure that is the case, but certainly you can't ignore the earnings recovery for now and the momentum that markets are starting to build. Climbing the wall of worry for just a little while longer before reality does set in.

One thing of note is that I thought beige book report wasn't that bad. Something about manufacturing in there gave me some hope. Manufacturing is the engine of the economy in many ways so seeing some hope there is a positive that industry may be turning around. Which in turn will add jobs.

Currently markets are sitting on a pivot point and started moving off to the upside today but I am looking for 10,600 to be breached before we have confirmation. The Euro keeps moving up as well so I see no real fear in the market in the low volume conditions the rest of the summer. Gold is also holding steady but think it it should get another $10 or $20 cheaper. Am not counting on a much more of a decline in Gold. But who knows? Still don't believe in deflation, not even in recession.