Top Line: The market didn't take long to jump with the Dow jumping up over 9000. We are looking for a pullback. When it occurs, we will estimate the distance it can travel.
The stock market jumped with the SP500 going from about 870 to last week's 980 about 13% in just two weeks. We are not happy to have missed this. Now we need to know if there is some downside and how much. We do think the downside is more possible than apparent. We have our reasons for this thinking...
The first is that the volatility indexes are having trouble dropping much more as the market jumped. With the SP500 jumping up 30 points last week while the volatility indexes hardly moved.
Our favorite stock for the 2009 is GDX and it has been our leader since October. With GDX not participating in the rally, as in, not making it back to 45, we think the market needs to back off a little to allow GDX to get back into its lead role.
Also, there seems to be a lot of bullishness. No one is really considering that the market can go down from here. If it does, the prices won't go down much at all, or so they think. These things raise the hair on the back of our contrarian necks.
Lastly, we don't think that the T-bond market is giving a clear signal of lower prices. They bottomed back about a month ago and even with the stock market continuing to march higher, the T-bonds have not been inclined to decline.
We will keep an eye on this market over the next few days.