Bulls Trying To Turn The Technical Corner

If you were to Google "Knocking On Heaven's Door," you would arrive at one of two links. The first would be a snazzy little Dylan ditty that's been covered by everyone from Axl Rose to Avril Lavigne. The second would be Friday's technology-led rally that juiced the tape to within spitting distance of resistance at S&P 1,405.

Here we are again, another critical juncture for the markets and those of us consumed with them. While technical analysis is a better context than catalyst, it assumes higher weighting in our metric mix when folks are confused and looking for legs to lean on. And make no mistake, there's no shortage of traders spun around these days.

Psychology has been reactive (bullish higher, bearish lower), fundamentals are mixed (buoyed by overseas sales and the weak dollar) and the structural imbalances have seemingly been absorbed by massive government intervention (whether or not the "panic phase" has been socialized away remains one of the more critical elements of risk analysis).

A quick sniff of the current landscape finds the DJIA and Transports trying to find footing on the other side of resistance (12,800 and 5,000 are the respective levels of lore). The S&P and NDX have yet to offer technical affirmation of the recent rally and the financials remain so far out of the game that we're left to wonder which way the ketchup will flow when the stars realign.

Over the weekend, Minyan Michael Santoli of Barron's offered food for thought on the year-to-date performance. He mused that if you're a fund that nailed the macro environment and identified the entire closet full of shoes -- from housing erosion to credit dysfunction to recession realization to the softening labor market -- you would have netted all of 5% in the S&P.

One of two reasons explains the relative traction: Either the muted downside reaction to news portends a sharp and snazzy rally -- one that will spark brilliantly once S&P 1405 is underfoot -- or government intention, coupled with the slack in the dollar, is masking disastrous imbalances that continue to build, fueled by policy and fed with complacency. Binary? In many ways, yes it is. Difficult? You betcha, on both sides of the ride. Impossible? Not on a bet, as volatility offers daily opportunities to those who trade with discipline over conviction. Sidle up to the edge of your seats, my friends, as this particular series of sessions promises to be chock full of nuts.