Thursday, July 28, 2005
The market continues to be plagued by indecision as a result of a intermediate overbought condition and a plethora of earnings releases. Scans turned up very thin this morning with a few short set ups. We are very hesitant to jump to the short side for several reasons. Today starts the 5-day window that marks the end of the month buying spree where funds have new dollars coming in from retirement account deductions. Likewise, the trend is still up and choosing a market top is a recipe for disaster. Finally, if the market fails here, the countertrend rally will provide a much better risk/reward ratio than gambling here. We are betting that short positions put on here are going to provide fuel for the fire as end of the month buying kicks in. Short covering should propel indices and stocks higher over the next few days.