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Do Not Feed the Bears

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While the picture still appears bullish, there may be some approaching opportunities for bears to feed on.

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Finally, I do briefly want to share a chart that illustrates a point that I believe is important. All of us are guilty of some degree of confirmation bias -- in other words, we sometimes see what we want to see. It's human nature. If you're quail hunting, suddenly everything looks like a quail, even Dick Cheney's friends.

If you're bearish, everything looks like the end of the world; if you're bullish, everything looks like a buying opportunity. It's difficult each day to unplug from whatever we were convinced of the day before, but I think it's important to look at the charts with fresh eyes every day.

I'm bringing this up because there is a pattern called an "ending diagonal" (in classic technical analysis, it's called a "bearish rising wedge") that is cropping up all over the place in charts right now. It can be a very bearish pattern, and the fact is, there really isn't anything yet that can definitively say it's not going to play out bearishly. But I do want to warn that the appearance of these patterns is not always a bearish signal -- in fact, sometimes these patterns can lead to very bullish resolutions. Since a picture is worth a thousand words, I present the chart of Pfizer (NYSE:PFE) as an example below:


Click to enlarge

In conclusion, I remain bullish for the time being, though would like to note the market is reaching an inflection point, and thus I would suggest bulls stay a little more alert than the last couple days have required. Complacency is never a good idea in trading, and it's very tempting for bulls to become complacent after a massive rally. Usually just about the time you start feeling invincible is when the market starts heading the other direction. While I presently view them as less likely, there are still some options for bears to get fed here, and I will cover those in more detail in the weekend update. In the meantime, trade safe.

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No positions in stocks mentioned.
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