ARE THE BULLS GETTING TOO CONFIDENT?

The jobs number came out last week and the bullish sentiment seemed to increase drastically. One word of caution...there isn't a more manipulated government report than the jobs number....especially in an election year. I'm including both political parties in that statement. What usually happens is that the numbers come out....usually more positively spun then negative...then the numbers get revised downward as the month plays out. One suspicious observation of this report is that it doesn't factor in people that have simply given up in finding a job. This recent report also showed that many of the job creations were the so called "burger flipping jobs". The point I am trying to make is that there is a lot of misleading news out there. What is amazing to me is how the Euro zone crisis has somehow magically disappeared. One thing that I have learned over the years is that markets can sometimes get irrational...and they can sometimes stay irrational for a while. However, I have also learned that they will always move back to normal at some point. The internet bubble is a good example. During that period I heard old timers say that the market rise couldn't be sustained by these internet company's valuations. The younger crowd told these "old timers" that they were crazy...that they just didn't understand. They rationalized that this time it was different. They felt that these companies could rise on these outrageous valuations because of the internet. They said that internet technology was going to change how every company was valued. Well, it turned out that the "old timers" were correct...and that the irrational market soon began to behave rationally. The Nasdaq market has yet to retrace half of that move down from 2000 to 2003...and it's been almost 10 years. Today's market isn't in a "bubble" state like it was in 2000, but we can use those lessons in analyzing current economic conditions. When the "old timers" tell me that the Euro zone problems have not been solved yet...and that it is likely still going to get worse, I'm going to listen.

The Nasdaq market broke above its May high last week. The Dow came within 7 points last Friday. The S&P 500 is still a few points away. The market sentiment is turning very bullish...which can be a bearish indicator. The market is currently overbought and the VIX is down near its 15 point support area. Even if I wanted to go long and buy some stocks, I'd like to see some pull back to buy into. If we pull back on average volume and no major spike in the VIX, I'll conclude that the selling is just a pull back within the uptrend. If we sell off on heavier volume and the VIX spikes up above 20 to 23, I might look to buy some puts.

An update on some of the recent picks....MYL has made a nice move up. It has recently broken out and is in a secondary "buy" positions. That means that if you missed the first entry, this could be your second chance. PFE is still in a correction. You would want to wait for a "buy" signal on that one. The AMZN Calendar Spread still looks fine. It will be very profitable if AMZN drops a bit more going into the February expiration date. VHC still looks good for a bullish trade. It currently has a "hold" signal, but this could be a nice entry here...if you want to be a bit more aggressive. HURN also looks good, but you might want to wait for it to close above $40 if you are looking to get into it. For new trades, I like HD and INTC as call option trades. Keep a tight leash on these. If the signal turns from "buy" to "hold" look to get out. You could also use the previous low as a stop loss point. For a bearish trade, I think WYNN looks like it will continue to drop.