Top Will Take Longer

I've been thinking about the action over the past week, and a bit surprised that very few people are believers in the rally.  CNBC traders seem to think this rally won't last.  But most are scared to short this thing as well.  I don't think there are many shorts left to squeeze.  But also without a resolution in Europe, you won't have the wave of fund money coming in to drive the market to 1250 and higher.  And I don't see a Europe resolution until the market forces it through panicky trading from a Greek default or some specific bank problem.  Dollar swap lines doesn't solve the problem.

So the most likely path now is one that brings a quick pullback late next week followed by another rally.  In other words, this benign period should last another 2 to 3 weeks, lower volatility with limited upside and downside.  A range somewhere around 1160 to 1230.  My outlook has changed because the character of this market has changed to BTFD (buy the f dip) with Europe putting in a short term bottom.  Europe has outperformed the US since Monday.  It takes time to get bulls on board.  Bulls don't like volatility, so the best way to get traders bullish is to have lower volatility, not necessarily higher prices.  From a price perspective, this rally has very little left.  From a time perspective, this rally still has a lot left in it.

After this benign period, we should get a sharp resolution to the downside to test 1100 and likely lower.