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We should be open to the possibility that...

...this little "recovery" becomes self-sustaining until it doesn't (which is different from not being self-sustaining at all). According to S&P, the consensus Q1 S&P 500 operating earnings number is flat with Q4 of '09. (Surprisingly, there's usually no "seasonality" there-- Q1 earnings are almost always higher than the previous Q4's.) Seeing as there's been such a big (relative) increase in rail freight, car sales (yes, there were incentives), etc. and Asia is absolutely booming (until it doesn't), there could be a lot of upside surprises in the earnings reports that are about to come out. Also, retail investor sentiment is a wild card here-- it's climbing to a bit more bullishness, but just to around the historical average. It's possible they could start "screaming to get in" (or not-- I just don't know-- they may not have the money to do it) before this is all over.

Meanwhile, I see the biggest NEW headwinds (housing and municipal layoffs are still there) being the capital gains tax increase for 2011 (which will encourage a lot of selling later this year) and the other tax increases for 2011 associated with healthcare, as well as an inevitable Fed rate increase from ZIRP by late-summer/early fall. If the market really does try to anticipate events four to six months ahead (and I've often doubted this), we could be headed for a blow-off top in the spring (maybe into late-April/early May) before this is all over.

Unfortunately, there are no obvious technical levels left on the charts any more, as we've blown through all of them. So now this becomes more of an "art" than a "science" (lol, as if there were EVER any "science" in reading charts). My best technical call now would be to see a double-top (matching the highs of September 2008, just before the big collapse) somewhere just short of 1300, and then a collapse.

Short-term, although the market is pretty overbought (with something like 90% of stocks trading above their 50-day moving averages), with the consolidation of the last two or so weeks, the overall market (SPX) is only around 3.8% above its 50-day EMA, while at extremes it can get as much as 9% to 10% above the 50-day, after which it could either consolidate, correct relatively mildly, or crash. So, another 6% to 7% move in the market would bring it to 1247 to 1259. (And the 50-day is creeping up by around 1.5 points a day, which could extend that range.) So my current thought is to get very short again somewhere around there, unless we get a major reversal day first.

Meanwhile, I'm writing all this around half an hour before the jobs report comes out, so maybe it will all be irrelevant (or maybe not, as we seem to be in one of those temporary times when "bad news is good news" and "good news is good news").