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Hoofmo's Mojo

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There are a number of factors suggesting a more aggressive level of consolidation or correction is needed to attract more significant buying for the equity markets. The driver for the rally thus far has been a lack of selling rather than aggressive buying as the market has climbed the proverbial "wall of worry." Clearly, the better than anticipated economic news has not caused a rush to enter stocks, so maybe a combination of price decline, time AND good news could do the trick.

It would be a stretch to say investors are pessimistic, but there clearly seems to be a feeling of nervous optimism. The effect of nervous optimism is that potential buyers acknowledge the "overbought" readings and wait for a pullback to buy, while the solid intermediate-term technical and fundamental backdrop keeps potential sellers at bay. The result is the market churns and frustrates just about everyone. We believe the equity market has probably been in this type of pattern since the overbought readings in mid October and may be approaching a more important period of correction. A pull back toward 1000 on the S&P 500 (SPX) over the next couple weeks or month would go a long way in drawing in more aggressive buyers needed to generate another significant and sustainable leg higher. Once the widely followed "overbought" condition is relieved, it will no longer provide a convenient excuse to not be more aggressive on the long side.
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Not to worry Daisy...Hoofy should be back soon
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