John Mylant's  Instablog

Technically Speaking

RSI- being over bought, I would be interested to see if the stock will move down off its high, but this pattern looks like it is headed back up and may even head back into over bought territory again. It sure isn't acting like it wants to back track just yet.

Bollinger Bands- the stock appears to have taken a slight rest from (click to enlarge)its journey clinging to the upper Bollinger band. But now it looks like it will continue to move up. I would be looking for the end of this second leg of the bullish trend but momentum does not look like it is coming just yet.

MACD- The MACD MA's look like they have reached a top but that top looks like it is turning into a plateau. When I am looking for a pullback, I want to see a peak, and it is usually the highest peak. This time though, I am not sure I will see that just yet. Momentum still points up!

Current Events

Wall Street's current jubilant narrative is that a rush into stocks by small investors has sparked a "great rotation" out of bonds and into equities that will power the bull market to new heights.

Even if something approaching a "great rotation" has begun, it is not necessarily bullish for markets. Those who think they are coming early to the party may actually be arriving late.

Investors pumped $20.7 billion into stocks in the first four weeks of the year, the strongest four-week run since April 2000, according to Lipper. But that pales in comparison with the $410 billion yanked from those funds since the start of 2008.

Bill Gross, who runs the $285 billion Pimco Total Return Fund, the world's largest bond fund, commented on Twitter on Thursday that "January flows at Pimco show few signs of bond/stock rotation," adding that cash and money markets may be the source of inflows into stocks.

Indeed, the evidence suggests some of the money that went into stock funds in January came from money markets after a period in December when investors, worried about the budget uncertainty in Washington, started parking money in late 2012.

With a light week ahead for economic reports and the final major week of the earnings season, there is not much on the calendar in the week ahead to cause the stock market's bull to stumble.

"Next week my biggest fear is it's such a low news week that we may shift our focus to "sequester cliff" and those budget negotiations in Washington," said Art Hogan of Lazard Capital. The sequester is the automatic spending cuts that take place March 1 if Congress does not act. While some economists think the economy could weather the "sequester," there is an anxiety about it in the market and that could grow.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Technically Speaking

RSI: The RSI has been bullish since early November and recently just reached the over bought level at 75.40 but it doesn't look like it will love down from that level just yet. Some times we look for a pull back at this point but I do not expect it to just happen. Other (click to enlarge)signals looks too strong.

MACD- The MACD is also very bullish and even though the RSI looks like it is in over bought territory, the MACD MA's are not supporting a pullback just yet. They are moving parallel and strongly point to a continued journey upward. I can see it leveling out but it is not showing any signs of slowing down yet.

Bollinger Bands- The stock continues to climb as it hugs the upper band and this is about the strongest type of sign we can get of a bullish climb. It is on the second leg of a its bullish trend and the present momentum would have me assume that a pullback would have the stock moving sideways toward the middle band.

Current Events

Happy days are here again.......Earnings have exceeded expectations, the housing and labor markets have strengthened, lawmakers in Washington no longer seem to be the roadblock that they were for most of 2012, and money has returned to stock funds again.

"Once we break above a resistance level at 1,510, we dramatically increase the probability that we break the highs of 2007," said Walter Zimmermann, technical analyst at United-ICAP, in Jersey City, New Jersey. "That may be the start of a rise that could take equities near 1,800 within the next few years."

The market has shown resilience to weak news. On Thursday, the S&P 500 held steady despite a 12 percent slide in shares of Apple after the iPhone and iPad maker's results. Worries about the U.S. stock market's recent strength do not mean the market is in a bubble. Investors clearly don't feel that way at the moment.

Do not Lose Track of Europe..International bankers and finance ministers warned on Saturday that Europe's crisis was not over even though the euro currency is now stabilized, it will take years to overcome economic malaise and mass unemployment in Europe.

China's economy could grow at more than 8 percent in 2013, giving some underpinning to global economic activity that is set for a mild, tortuous recovery this year, the head of China's sovereign wealth fund said on Saturday. China's economy expanded an annual rate of 7.9 percent in the fourth quarter of 2012, snapping seven consecutive quarters of weaker growth, as a raft of pro-growth policies kicked in.

The Q4 bounce helped lift full year growth in the world's second biggest economy to 7.8 percent which, though China's slowest pace for 13 years, generated roughly a third of global economic growth of 3.2 percent - itself the worst since the 2009 financial crisis and just barely above the 3 percent mark economists say signals a worldwide recession.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Technically Speaking

RSI-since its last move down at the turn of the year, the RSI indicator has been very bullish and I believe it will remain that way. The move is very strong and it is just below the over bought position at 69.48. Momentum continues to move up so I would not be surprised if it does become over bought this week. But I do not believe this will cause a pull back just yet. (click to enlarge)

Bollinger Bands-after the gap up at the turn of the year, investors look to see if the gap will fill. It did not! The stock moved up and since it is hugging the top of the upper Bollinger band (almost) it is showing that it is very strong and continues to look like it will move up.

MACD-The MACD MA's continue to climb with momentum and are parallel to each other and this appears to mean the stock will continue to move up-- at least this week. When it does peak, that could signify a pullback, but I do not believe that will occur this week.

40 Day MA-the stock is climbing quickly and this can be seen in how high the stock is above the 40 day MA. It climbs much higher so I would expect the stock to slow down (even for a short rest) in the next two weeks.

Current Events

Markets are closed Monday for the Martin Luther King holiday. There are just a few economic reports, including existing home sales Tuesday, weekly jobless claims Thursday and new home sales, on Friday. President Barack Obama is inaugurated Monday.

Richard Bernstein, CEO of Richard Bernstein Capital Management, said he expects the debt ceiling and budget issues to be resolved better than many expect. As for Congress, "I think public opinion is getting to the point where the debt limit thing will solve itself," he said.

The Dow Transports, however, rose 2.2 percent to an all-time high of 5695, a move that is being watched with an eye on the Dow. If the Dow now recovers the 3.6 percent needed to reach its all-time high, some traders believe that confirming move of the industrials would signal further market gains.

CEO Caution

The final quarter of 2012 treated Corporate America well, as most companies inaugurated the New Year with a batch of quarterly earnings that beat the market's lowered expectations. Still, most corporate chiefs say uncertainty remains the order of the day. High stakes policy skirmishes in Washington loom, which some fear could undermine the U.S. economy's budding recovery.

CEO James Gorman said a stock market rally could "still move higher" should Congress and the White House find a way to resolve the policy gridlock. The macroeconomic trends favor stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.