Believe it or Not, the Bullish Case Still Holds

 | Aug 29, 2012 | 11:00 AM EDT
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I saw a blurb on CNBC last week that said strategic investor Dennis Gartman was moving to the sidelines. Meanwhile, Real Money's own Doug Kass is concerned about a triple-top for the S&P 500. So I get the bear case. It holds some water.

A lot of good news has been priced in quickly, and if the European Central Bank and the Federal Reserve don't do what's expected, the market could easily give back some of its gains. Meanwhile, recent manufacturing data have been downright abysmal -- the Philly Fed index has contracted for four straight months, and stubbornly high unemployment and lofty gas prices look like they could be around for a while.

As the S&P 500 flirts with an upside breakout, the fact that it hasn't taken out its early-April high with conviction isn't a big surprise. There's still a lot of institutional money on the sidelines.  Also, it's common to see a shakeout before a breakout, especially given the S&P's six straight weekly price gains. From here, I wouldn't be surprised to see the index come down to its 10-week moving average, currently at 1386. That would be a pullback of 2.8% from its recent high of 1426. If it breaks through this support level, its 40-week MA would be in play at 1345, but I'm not expecting a pullback of this magnitude.

That said, the bull case isn't a bad one either. In fact, I think it holds water even better than the bear case does.

The market had a reason to go down Tuesday when ECB President Mario Draghi decided not to attend the Kansas City Fed annual economic symposium in Jackson Hole, Wyo. He was supposed to be on a panel Saturday. Clearly, Draghi's plate is full ahead of an important ECB meeting Sept. 6.

The one thing I find most encouraging about this market is the number of bullish charts out there. Not only are major averages holding on to gains smartly, but there are scads of growth names that aren't showing much in the way of sell signals. Until I start to see repeated signs of institutional selling in institutional-quality names like Apple (AAPL), eBay (EBAY) and Amazon (AMZN), for example, I won't yet be ready to join the bear camp.

When it comes to the major averages, they're not flashing much in the way of sell signals either. The S&P 500's higher-volume reversal Aug. 21 wasn't good to see, but one day of selling like that won't necessarily kill an uptrend. I'll need to see several higher-volume gains in the indices over a period of a few weeks to get concerned.

When it comes to actionable buying opportunities in individual stocks, my growth screens aren't giving me a whole lot to work with at the moment. They had been, but the market's been running higher for a while now, resulting in a lot of extended names.

I keep hearing how great fundamentals are at the oil refiners. I don't disagree, but it's generally too late to buy here. For instance, Delek U.S. (DK) was interesting when it broke out over $17, Tesoro (TSO) looked good when it cleared $30 and Western Refining (WNR) was a buy when it cleared resistance at $17. But in each case, the train has already left the station. It would better to wait for a pullback at this point.

Even though leadership has been popping up for several weeks now, a few names are still within range, including engineering simulation software firm Ansys (ANSS).

Panera Bread (PNRA) and LinkedIn (LNKD) could also see higher prices if a new wave of money comes in from the sidelines.

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we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
Large-cap, high-quality McKesson (MCK) is too cheap now, at $147.51 or so. The stock hit $243.60 more than 2.5...
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