Yesterday we had suspected small speculators in the S&P had begun going long and today's trade seems to confirm that they are flipping to the bull camp. However, this often marks the end of a move...or at the very least, price consolidation.

It will be interesting to see what tomorrow's COT data reveals, but I suspect the nature of the recent rally points toward panicked trades. At first, the rally was driven by panicked shorts attempting to offset bearish bets without losing their entire shirt (although we've heard unsubstantiated rumors of several prop trading desks and hedge funds that blew out their entire operation on the move thanks to short futures and call options) but today's trade appeared to be a different type of panic. It almost seems as though the same bears that painfully exited bearish trades at horrible prices could be chasing the market higher (going long), perhaps out of shear desperation to recoup what was lost on last week's move. In the past, this type of price action hasn't ended well...and we suspect those going long and current prices could soon regret it. We've said this before, but we'll say it again... buy it when "they" cry and sell it when "they" yell.

We've been noting a potential price spike in the indices that could see the mid to low 1350's in the S&P, and here we are. In our opinion, it will take an outstanding non-farm payrolls report to justify higher prices. In other words, the ADP triggered rally in today's session is already accounting for 150,00 to 200,00 jobs added. To see even further gains we will probably need a figure well into the 200's. That said, it wouldn't be out of character to see some sort of last ditch, knee-jerk buying spree on the news. We'd hate to see it, but 1365 in the S&P (equivalent to the mid to high 860's in the Russell) isn't out of the question before selling ensues.

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