I’m not a fortuneteller, so I’m not going to try to predict how long this pullback will last. But what I will tell you is how bull markets tend to trade: they open lower, then grind their way higher throughout the course of the day. If we see this market work its way back up this afternoon, it could signal that this market is really ready to break out.
In the next couple of days we’re going to see end-of-month activity start to play into things as well. Remember, we have that T+3 settlement process for stocks, and there are still a lot of portfolio managers out there who are underinvested. The fact that they don’t have the positions on that they need to have on between now and the end of the year could create a tremendous base for an even bigger move that could catch everyone off guard. I’m looking as high as the 1350 area for the S&P and maybe another 100 Dow points before we’re done.
Keep an eye on the 10-year, and look for it to work its way up to that 2.30% level on the yield as more of that scared money finds its way back to risk. Unless we see some kind of a black swan event or something new out of Europe, that’s going to continue to be the leak—money will work its way out of fixed income and into equities. Watch the natural ebbs and flows over the next couple of days for opportunities. And don’t forget we’ve got the first-look GDP on Thursday—that’s one of the bigger numbers we have on the calendar in the next couple of weeks.