Little Double Top Forming

We have a little double top forming and we'll have to watch very carefully if we come back down and test the lows of last week around 878 on the S&P 500. That will be the line in the sand that will trigger stops, so keep it on your radar.

After a weak close last night and a poor response to earnings from Hewlett-Packard (HPQ - commentary - Trade Now) it looked like the market was ready to struggle again this morning. However, a huge secondary offering by Bank of America (BAC - commentary - Trade Now) that was quickly gobbled up gave the bulls something to cheer about. Once again the bears were caught flat-footed and we end up with some short-squeeze-induced euphoria.

But what has made this market much more interesting lately isn't the choppiness of the major indices but the very strong momentum under the surface. Even with the red close, breadth was still positive and we had some big moves in select small-caps particularly in the solar energy group.

One group of particular interest was gold, which had some big volume and some good looking breakouts. It's a group that can be tricky to trade, but it seems weakness in the dollar is providing a tailwind. Market players have been trying to catch this group for a while and the recent pockets of momentum could easily shift to precious metals at this juncture.

After the market rolled over last Wednesday, a lot of folks were looking for more downside but we squeezed and bounced big on Monday with little volume, which helped reignite bullish optimism. With the rollover today, the light-volume rally on Monday is even more suspect.

I've been distrustful of the indices lately but trying to indulge in some trades in the hot sectors while the momentum is running. I'll be looking much harder at pressing some index trades to the downside now.

Have a good evening. I'll see you tomorrow.

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Know What You Own: Major financial stocks include JPMorgan Chase (JPM - commentary - Trade Now), Citigroup (C - commentary - Trade Now), Wells Fargo (WFC - commentary - Trade Now), US Bancorp (USB - commentary - Trade Now), Deutsche Bank (DB - commentary - Trade Now), Morgan Stanley (MS - commentary - Trade Now) and Goldman Sachs (GS - commentary - Trade Now). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.