Draghi Delivers… Bears Lie in Wait

In one of the better telegraphed moves out of the European Central Bank, Mario Draghi & Company gave the market what it had been expecting, using some fairly heavy ammunition to provide stimulus to Europe’s struggling economy. He may not have gone to Hank Paulson’s bazooka just yet, but they are getting close!

Thursday was a solid win for the bulls as the Dow, S&P 500, S&P 400 and Nasdaq 100 all scored new highs for 2014 with the lagging Russell 2000 leading the day in terms of price gains. A sore spot for the  bears to focus on has been the lack of confirmation by most of the major indices, but that has all but been eliminated with just the small caps needing to catch up.

Sector action was impressive across the board and the bulls continue to stampede each and every short-term opportunity, like the one I wrote about just two days ago. Some of the short-term concern remains with today’s employment report many times acting as a fulcrum for short-term move in the opposite direction.

I may sound like a broken record, but until proven otherwise, all short-term pullbacks are buying opportunities. The bull market may be old and wrinkly, but very much alive. Unless 2014 is a precedent setter, the usual pieces for a bear market are simply not in place and even 10%+ corrections should lead to more all time highs.

For today, a celebratory opening will offer the bulls a good spot to take some chips off the table, something I will consider for the first time in a long, long while. This bull market continues to be one of the most disavowed in my 25 year career. Investors seem to have this strong bearish anchor but temporarily get excited at new highs on news. That’s not a successful long-term strategy.

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Big Day for the Stock Market… Twitter, ECB, GDP

The media and masses are all keenly focused on Twitter’s overblown IPO. Too bad you can’t trade it to the short side. Already, some knucklehead paid north of $50. Do people ever learn? While I do not think we will ever see the tech mania like the Dotcom bubble again in my lifetime, we are certainly seeing froth in the social media space and that’s not a good thing!

The real news of the day that is now only a footnote is the unexpected rate cut by the European Central Bank. Although, this is LONG overdue, the Europeans have been about jawboning and threatening the markets rather than action. With inflation in collapse and deflation creeping in, we are getting much closer to what I have spoken about since 2010, QE Europe. The ECB is trillions behind and better get their act together!

U.S. GDP growth came in much higher than expected for Q3, another piece of positive news this morning. So with Twitter, ECB and GDP, you would have expected another romp into new high territory. However, the bears look like they are finally making a meaningful stand. A lot can happen by 4pm, but at this point, it looks like stocks are in routine and healthy pullback mode of 2-6%.

Adding to the notion of some weakness are the recent sentiment surveys which show far too much bullishness among newsletter writers and the public.  With the employment report tomorrow morning and the poor showing this morning, a strong open on Friday could be a nice short-term selling opportunity.

As I discussed, http://www.investfortomorrow.com/newsletter/CurrentStreet$marts20131105.pdf and http://investfortomorrowblog.com/archives/789, I do not believe the bull market is over and we should still see higher highs after this pullback.

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