"The question that should be on everyone mind is what will take the market up once earnings season is over? We're greatly overbought and heading into negative seasonality."
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Bearmove...
Your question assumes that something fundamental has been driving the market higher. If so, I have no idea what it was since fundamentals have been very poor and getting worse, not better. Certainly it was not earnings, for the best that can be said is that recently lowered earnings targets were met for the most part but it is hard to miss recently lowered estimates when using "pro-forma" mythical numbers. Even then revenues came in light in many cases and worse, guidance in most cases (for those that dared to give guidance) was lowered yet again. Finally, with inventories rising at all points along the chain, we can expect a very active warnings season before this quarter is over.
Technically, by most measures the markets are getting overbought, as you noted, and internal indicators run from negative to quite negative - VIX/VXN, P/C, new highs/new lows, A/D, Money Flow, RSI, and on and on. Just about everything I look at says we are at a top here. Looking at the charts, we are right at important highs which should provide stiff resistance, especially for a market that is already overbought. About the only positive things I see are that a number of indices and individual stocks have broken above their 200dma (although just barely), and we are now entering the "dead zone" from a earnings and warnings standpoint, which represents a more favorable time to tout a rally.
Looking at both fundamentals and technicals, it is very hard to make a case for anything but a top followed by a solid downturn here, with new lows a very reasonable possibility. Yet the same could have been said a week or two weeks ago, but the markets have managed to continue moving up ignoring both the fundamentals and technicals, and we are now at a very crucial juncture for the markets. A move higher here will represent a breakout on the charts and that would likely bring in some money off of the sidelines along with a new round of short running by the mo-mo boyz with "the new bull market" being touted by the talking heads on TV, even though such a notion is laughable with a steadily declining economy and extremely high valuations.
My conclusion is that the markets did not get to where we are on their own, and have had significant "help" along the way, whether by "da boyz" or the Fed/PPT - take your pick, although it is obvious which one I believe is behind the move. Either way, it is hard for me to believe that after expending all the effort and capital needed to get us to this point that they would not go all out to get us through the resistance and into a breakout which should become self sustaining for a short while, enabling them to dole out their accumulated inventory at a profit.
For Greenspan, it is critical that the markets not turn back down for strong equity markets are his only hope to rescue a dying economy that is quickly falling into recession both at home and globally. I believe he will do everything in his power to engineer that breakout. Although he may have to allow a short period of consolidation due to the overbought conditions, the optimal outcome for him would be for an immediate break to the upside which would trap a ton of bears forcing maximum short covering as additional fuel for the run - I think that is what he will try to do if at all possible.
As I have been saying for a while now, until the hedge funds and institutions are no longer willing to play his game and bring in concerted selling in volume, Greespan is in charge of this market. Given the extreme valuations and very poor fundamental conditions, that swing to the sell side to lock in profits and eliminate market risk could come at any time, including this week - there is no way to know. But until aggressive selling comes in with volume, I am not willing to bet against Greenspan here, and will wait to see what happens.
Either way it goes in the short term, a solid downturn in the markets seems inevitable over the intermediate term, almost certainly to new lows. Fundamentals should continue to depress the markets for much of the remainder of the year and into next year.
mlsoft
AI
Market Data 
Markets 
