Markets are down across the board today, with the S&P, Nasdaq, and Russell 2000 all off about 0.5%. Commodities, with the exception of grains, are also lower, even as The Dollar is off significantly. Bonds have a slight bid today, albeit insignificant at this juncture.
As markets press against five-year highs, bearish sentiment continues to pervade. Granted, there are a good number of bulls that have now accepted this rally, but it seems that the amount of doubters continues to grow in proportion to the upward move we’ve been seeing. Despite the big spike early last week, many major sentiment polls(Investors Intelligence, AAII, NAAIM, etc.) actually showed a decrease in bullish consensus.
CHART OF THE DAY
LinkedIn (LNKD) – The social-media company has been in a coma lately, but looks to break out of it in the very near future. It is currently consolidating near the 110 level, which acted as resistance in August. You’ll notice how the 50-day moving average(blue trendline below) has flattened out and appears to be turning higher. This could be an indication of a trend change.
Over the past month, short interest toward LNKD grew by 23%, while the stock essentially traded sideways. Should some buyers step in here, there is the potential for these newly-trapped shorts to be forced to cover. An entry here with a stop around 106 makes sense to me. I’d target an initial move to the the 125 price level, with an extended target well above there.
WHAT I’M EXPECTING
More upside. Markets continue to press against the highs we made in 2011, and the longer this region is tested, the more prone it is to breaking. The old saying is “Markets cause the greatest amount of pain for the greatest number of participants.” Given the strong price action amid growing skepticism, it makes the most sense to see another upward thrust. The next area of resistance will likely be the 1500 level on the S&P 500 and the 900 level on the Russell 2000. I’d continue to look for support at 1440 and 1425 on the S&P should some bad news surface.