"People almost invariably arrive at their beliefs not on the basis of proof but on the basis of what they find attractive."
The major indices have been under pressure for weeks, but the rally on Monday was sufficient to push them back into a full-fledged uptrend. The Nasdaq is leading the way with new all-time highs while the other indices closed at their highest levels since mid-March.
Despite the improved action, the issue that has plagued the market since March 1 has not been resolved. That issue is the lack of sustained momentum. While there have been strong moves there hasn't been good follow through. The S&P 500, for example, has not had back-to-back positive days in the month of April.
Today will be a very good test of whether the market has regained its momentum. There are four Dow Jones Industrial Average stocks reporting before the open this morning. Coca-Cola (KO) , McDonald's (MCD) , DuPont (DD) and Caterpillar (CAT) will start things rolling and will be a good test of how anxious market players are to find an excuse for additional buying.
So far earnings season has been lackluster, but it picks up this week and we'll see if the poor response to early reports from the likes of Goldman Sachs (GS) and IBM (IBM) were an aberration or a theme that will continue.
Despite the big gains yesterday, there was little mention of the fact that all of the movement occurred over night. If you bought the open and sold the close you would have been lucky to break even. Good performance depends on already being heavily long.
Since many market players were not well-positioned for this surprise move on the French election, it is supportive of more upside as they look for opportunities to put cash to work. Underinvested bulls have been one of the main driving forces in this market for years and they are feeling anxious again after the action on Monday caught them by surprise.
There is some early follow through this morning but the bulls need to hold steady today and show that they have some persistence for a change. The ability to put together a couple good days in a row is what has been missing. Yesterday was a good start, but today is the real test of whether this market is back on track.
I'm holding a high level of cash and will be looking hard for opportunities to put some of it to work. I've been having a hard time finding setups I like, but the key to trading is to keep on plugging away day after day. If the market really has returned to good health, the trades will develop.