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S&P 500 ETF (SPY) Bullish Trand but Trade Cautiously

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Technically Speaking-

Getting back into the swing of things after being gone for a week. I blocked off 2011. Wow, what a ride we have had. And where are the signs of stopping? We do not have any technical indication at all of stopping the bullish trend we are on, even-though it is a very long one.

Volume is steady and we just continue to move up and up. Possibly earnings could do it eventually but trade accordingly. The only problem we can run into is people jumping on board as the trend may eventually level out. Late traders I would call them, but we are still very bullish.

Other Market Influences-

The market is only a few percentage points from a nearby top and possible correction or sideways movement. However, the Dow Theory signal as well as the relative out-performance of the small cap Russell 2000 index and the struggling bond market could also support the view that this stock rally will still have legs.

The expected outcome is a Fine Gael victory in Ireland, which will seat a coalition that will at some point at least threaten to renege on at least some of its bank debt obligations because there is no rational alternative under the current circumstances. Neither Germany nor anyone else has yet to show signs of offering any serious alternative. The big question for this week is whether restructure talk or some more EU-palatable alternative will already begin to emerge in advance of the new elections.

All that is happening here in the news and markets: gradually-building economic strength in the U.S., widening violence in the Middle East, China’s efforts to slow its economy (on Friday China raised reserve requirements slightly, but unlike when the CCB hiked interest rates a couple of weeks ago the market seemed to ignore it), signs that inflation is starting to rise, continuing debt problems in a number of European countries and uninspiring leadership on our own debt problems in the U.S.. Could it be that everyone is just confused? Be cautious!

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