I wrote about two weeks ago that I was seeing strong upside momentum across the board (see Upside breakouts everywhere). SPY had staged a convincing relative breakout against IEF, the 7-10 year Treasury ETF, and the breakout has held despite last week's weakness:
...though the SPY to TLT ratio remains below a key relative resistance level and more work needs to be done by the bulls:
Last week, I wrote that I was willing to give the bull case the benefit of the doubt for now (see Giving the bulls the benefit of the doubt):
I am inclined to give the bull case the benefit of the doubt for now, though I am maintaining a risk control discipline of tight and trailing stops.
The US economy continues to muddle through without a slowdown and Europe seems to be turning around (see Europe healing?)
Now even China has joined the bulls party. Take a look at the Shanghai Composite, which rallied through a downtrend and is now showing a pattern of higher lows and higher highs:
Despite my worries about the sustainability of China's growth model, I have to listen to the message of the market. With the stock markets of all three global economic blocs exhibiting bullish technical patterns, I have to give in to the Dark Side yet one more time and temporarily set aside my concerns about these overbought and exuberant markets and stay long, albeit with tight stops.
Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.
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