Scared Bears, Emboldened Bulls

My inbox is filled with emails from folks wanting to be bullish because they say everyone sees the head-and-shoulders top in the S&P 500. As is typical --since we know I see head-and-shoulders patterns everywhere all the time, mostly before they can be seen -- I saw this pattern before it was apparent and now it is so obvious it's on everyone's lips.

But then my inbox is filled with notes from folks who want to be bullish because they say everyone believes because of the historical precedence of this "golden cross" thing that it must work.

So to sum it up, the bears are scared because the head-and-shoulders top in the S&P 500 is so obvious; the bulls are encouraged by the crossing of the 50- and 200-day moving average lines. Of course, if you step back, that means the bears are scared because they fear everyone sees the head-and-shoulders top and the bulls are emboldened because they see the so-called golden cross.

Rather than get into the whole golden cross thing again I'll simply state that the Japanese who coined this phrase and first worked with this indicator in their markets used the five- and 25-day moving average lines, and both had to be moving in the same direction. I'm not disputing that the 50- and 200-day moving average lines both heading up is bullish. I'm asking where they heck they all discovered this to be a golden cross since none of them warned you when there was a black or "death" cross in late 2007.

So rather than try and discern what we should "fade," let's look at what investors are doing and not what they are saying.

What they're doing is buying calls, and way too many of them. You see the Index put/call ratio fell under 100% (OK, only by a smidge, but it was under 100%) on Friday.

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At the time of publication, Meisler had no positions in any stocks mentioned, although holdings can change at any time.

Helene Meisler writes a daily technical analysis column and TheStreet.com Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.