Thursday, November 17, 2005

The Bearish Case Weakens

Well, as much as I hate to admit it, the case of a downfall in the market anytime soon took another blow. Recent strength in the market - especially in the face of what should be viewed as weak economic data - speaks for itself. I'm getting very close to the point that even I'll have to admit the bulls are firmly in control for the forseeable future. (And some stocks are just beyond belief - check out NTRI and HANS!)

The S&P 500 ETF, the SPY, is getting terribly close to crossing above its highs for this year. If that happens, that will be the final nail in the bear's coffin for the time being:



Some major ETFs have already crossed into new high territory. Particularly strong is the Nasdaq 100 ($NDX):



Also strong, and until recently a favorite short of mine, is the MidCap 400 ($MID):



So, as long as I'm sheepishly visiting the bullish camp, how about some specific suggestions? The stocks below are in technical formations that appear quite attractive; I suggest you check out the charts and see for yourself:

ABI - Applera Corp
RATE - BankRate
JCOM - J2 Global
KYPH - Kyphon
NOVL - Novell
RBAK - Redback Networks
VIGN - Vignette

It will take a pretty serious swan-dive for the market to clearly be bearish again. I hope that it happens, but remember, the word "speculate" is derived from the Latin verb "speculare". Which means "I observe", not "I hope....."

1 comment:

alexandrosrex said...

I agree that the market is behaving like a bull market. The tape suggests a continuation of the trend after a break out with volume on both S&P 500 and the Nasdaq. I would not fight the trend but at the same time I would not trust it with a high level of confidence and I would be paranoid and on the look out for a false break out. I would also use tight money management.

If one puts the S&P 500 3 year daily chart with the advance decline line, one can easily see a negative divergence. As the market breaks new highs the a/d line stubornly stays very close to its lows. That means less and less stocks are participating in the rally. Also looking at the S&P 500 (3 year daily again) with the new highs over new lows (nh/nl), that shows a negative divergence as well. The nh/nl line has been contracting as the market is making new highs. In a real bull market the nh/nl line should been expanding.

Now if the ad/line and the nh/nl line start moving higher then I would say that the bull market is firming up. However if the negative divergence continous I would be very carefull.