Even the Kitchen Sink

On February 11, the Dow Jones Industrial Average was down more than 400 points and looking like the bottom was completely falling out.

Financial airwaves were jammed packed with fear mongers and die-in-wool bears taking a victory lap and warning “this is just the beginning.”

As it turns out, the market rallied into the close to only close down 237 points and form the perfect double bottom technical formation.

(This is the simplest chart formation and without a doubt the most effective.)

Of course trepidation cast a shadow over subsequent sessions even those that were higher or especially those that were higher. We couldn’t allow ourselves to believe the market would or could come back for a variety of reasons.

We were cautious but added fresh names or reiterated those that we felt were oversold. And even today, the airwaves will be filled with the naysayers doing public service announcements about the end of the world. I get it; markets crash from time to time but also come back to new all-time highs, too.

I also continue to point to the blue chips leading the way as a sign this rally isn’t about hype or fast money. Look at the surging new highs on the New York Stock Exchange.

I like the slow and steady upswing of the market, and if it continues, even the bears will have to join the parade- already many are being forced to cover short positions.

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Keep Dow resistance begins at 17,720 through 18,000.

I’m not worried about this being some kind of bear market bounce in stocks, but clearly that’s what it is in crude oil. But even bounces become rallies and bear markets become longer term bull markets. A key way of discerning this is the length of these rallies.

• Feb – Mar +54%
• Aug – Oct +33%
• Mar – May +50%

It might not be how much further but how much longer oil has to go to determine if it’s a flash in the pan. If it’s not, the implications are great for US producers and the global economy. (Of course part of that would be skewed by the determination of China to generate 6.5% growth at any cost.)

Crude Oil (WTI) is breaking through $40.00 which only a week ago looked like a tall hurdle. There maybe some resistance around $43/$44; beyond there, it could spurt to $50 quickly on a short-covering rally.