With Roubini and Whitney both more cheerful, market may have bullish path but technical cautions deserve attention

Nouriel Roubini has added his voice to Meredith Whitney's now, providing a big "double whammy" to the bearish case for equities markets - certainly, it seems that way today. According to Briefing.com's mid-day update: "Often cited as a "perma-bear," New York University Professor Roubini said the worst is behind in terms of economic and financial conditions, Reuters has reported. The comments come after this morning's weekly jobless claims reports showed the lowest jobless claims tallies in months." It's interesting that one of the analysts I track had predicted that the employment picture would improve after June - not sure if I'm at liberty to identify who that was, or more about their outlook on the markets - but it's an example of why I'm careful about which analysts I draw upon for this UnbiasedTrading blogspot.

**UPDATE 7/17 - A reader has commented that Roubini has, at least partially, retracted some of that statement, but we are not yet sure of the source either ... What I can add, is that I noticed on Bloomberg a headline saying Roubini had clarified things get better this year, but that next year 2010, more stimulus will be needed. (Why are we not surprised?!) The reader is also providing a link to comments of Nenner, at http://www.thecrosshairstrader.com/2009/07/charles-nenner-on-bloomberg-radio/ - I probably won't be able to listen until the weekend, but there it is fwiw.

So with Meredith Whitney and Nouriel Roubini both chirping much more positive nowadays, is the market's path clear for the bulls? Well perhaps, but from a technical perspective we know two things - there was a good breakout on the McClellan Oscillator as I posted, but the market's also overbought and due for a pullback. An overbought market can run on longer than bears (shorts) expect, but we'll continue to track from the analytical perspectives as always. I showed the bullish sentiment last night, that suggests the market's overheated in that way, and the VIX - while intraday it's testing again the 24.78 level - isn't guaranteed to complete the "bull trap" down to $14 as its default P&F at Stockcharts.com is now showing. Tomorrow is opex Friday with its own machinations that can affect equity market pricing, and VIX futures expire next Tuesday which may provide a little gyration as well.

From a fundamental perspective, we also know that simply because Whitney and Roubini have made statements that must be music to the bulls' ears, doesn't mean we have an "all clear" on the economy or the markets. The commodities markets are still sending a sign that deflation remains an issue. It's possible that commodities prices staying low will help economic recovery over time, so this may be a good thing for stocks eventually. Uncertainties also remain over many banking and financial companies ... on my charts, the banking sector is improving, but I'm less certain I see that in the financial sector right now. I'll be paying special attention to both in my usual round of charts analysis this weekend.

Are there sectors I like? Well I'm delighted with my biotech, which had worried me but is doing very well today, along with my UNG of course. The semiconductors I'm not convinced of yet but may deserve a second look.

What would it take to get me closer to the bullish camp? The "old fashioned" Dow Theory idea of the Industrials and Transports bettering their January highs, would carry a very long way!! Otherwise, I keep thinking about that Bradley model and about the Elliott Wave possibilities that say we cannot have good confidence of the equities markets marching on up from here. For example, if the S&P 500 were to better its June high, there's a very important Fibonacci retrace level in the area of 961/963. I've learned to respect Fibonacci levels very much, so if the market can get there without rolling over, then I'll be very alert at that point.

In any event, if the VIX avoids getting entangled with 24.78 the way it got entangled with 33.81, and therefore moves up soon, I'll take that as a bearish signal for equities. Yes, it is possible for equities to reach higher levels with the VIX not making new lows - we know that from 2007! So we'll chart them independently ... but this is certainly a factor in my own decision making.