A Successful Retest?

Once again, the bulls were saved by a final hour rebound.

Amid a plethora of bad news, comments from the CEO of Cisco Systems and another late day bond bailout rumor sent the market scurrying higher after what I suspect many bulls will be quick to call as a successful retest of the January lows in the S&P.

This action is somewhat useful and provides additional evidence that the main fear out there remains that people don't want to be left behind another rip roaring rally. Even amid today's declines, I saw little panic or fear on my screens and, trust me, I'm really looking for it.

People think that you can make loads of money in bear markets as you just go short the trend and sit back and enjoy the carnage, but that's not necessarily so. Bears tend to be fickle and thin-skinned and nervous just like the bulls at the early stages of a bull market. The real danger for the bears will come when they feel confident that they can press their positions even when the news improves.

Over the weekend I spent some time preparing for the upcoming Q&A with Jason Goepfert at Sentimentrader. At Jason's website he provides the following data that shows how hedge funds are currently positioned which I would like to share with you:

The so-called smart money is decidedly neutral - neither bullish as they were last summer and far from as bearish as they were when the market bottomed out back in 2003. What does this mean? I'm not sure, but I think it may explain why we're seeing such up and down days. The smart money is as just as confused on what to do and where the market is headed like the rest of us. Eventually this will sort itself out, but for now we have to trade the edges we can find and not press our luck in an otherwise inhospitable environment.