Wednesday, April 05, 2006

Bullish Charts for a Bullish Market

Maybe you think you're on the wrong blog, since I actually have some "buy" recommendations today. But if you can't beat 'em, join 'em, and I'm sick of fighting the upward tide.

The Dow Jones Composite hit a lifetime high today. It is currently 12% above its peak during the Internet bubble. The Dow Transports also hit a lifetime high today, and it is 23% above its bubble high. The Dow Industrials is still about 400 points below its lifetime high, and it needs to cross above 11,335 before that becomes a possibility.

One compelling chart for a bullish case is this one of the NASDAQ Composite. It sort of kind of has an inverted head & shoulders pattern. Not textbook, by any stretch, but it keeps pushing its way into relatively clean territory.


The Gold market is one which seems clearly past its peak. The chart below shows nearly twenty years of data for the $XAU, and it seems to have hit a major top for the third time in a row (see circled prices).


First recommendation is NWRE (stop price: 21.53; in all cases, the stop price cited means any price below this should generate a sell @ market order).


Second is Prudential Financial (PRU, stop price 74.52). I suggest waiting for a breakout to a new high before pursuing this one.


Radyne (symbol RADN stop 12.68) is next:


SCMR (stop 4.46) has been struggling for years. It needs to clearly break above this saucer, but if it does, it could mean a major move.


Lastly is TradeStation (TRAD, stop 13.33) which not only has had great price action lately but also a sensational increase in volume. Always a powerful combination....

8 comments:

John Wheatcroft said...

Some comments on the selections. I put them through my mill and this is what came out - RADN and TRAD are ok look like they are just getting ready to run. PRU is iffy but over 77.50 it might be ok. Both NWRE and RADN appear to be topping. They've both been running for some time already and may need a rest.

I disagree with your comment on gold - I'm not a gold bug just a chart reader and the charts (both gld and xau) tell me that gold has a ways to go. It might take a brief rest but I don't think it's done.

But what do I know? Same's everybody else - nada.

options.fx.trader said...

So this is what we have come to. The Theory of the Contrarian Opinion. Let the story of Jesse Livermore be remembered.

Kapil Khanna said...

Tim,
I hope you and Mike Stone are not ganging up to jinx the market :).
NASDAQ is kinda clear all the way to 2800 if it can have a healthy breach of 2400.
Keenly waiting on DJIA breach of 11430 to increase my bullish commitment.
RHAT also is a great buy if $31.50 is breached.

options.fx.trader said...

So this is what we have come to. The Theory of the Contrarian Opinion. May the story of Jesse Livermore be remembered.

costas1966 said...

Well if Tim is getting bullish we must be close to the top since no short will be there to get squeezed not even myself who I must admit covered my last short position today, ICE. So I guess including me, there is noone left on the bearish side. Anyway I dont blame Tim. There is no reason to argue with the market at this point. Its clearing resistance and moving higher. We can play bullish setups in this market but we must think in the back of our minds that it can turn so fast to the bearish side before we can say "sell". To me this market looks much closer to the top than what the charts are suggesting. All the dogs have run lately (leaders of the past bull market) jdsu, cien, orcl, sunw, msft, lu. The leaders of the new bull market, the steels, the aluminums the golds, the silvers, the transports, the brokers are going parabolic and that is a late bull market phenomenon. The Fed keeps hitting the breaks, Joe Batipaglia, who recommended buying the Nasdaq at 5000 is bullish, touting energy and gold stocks and Jim Cramer rarely hits the bearish button anymore. I dont know. Are you sure you want to jump on the bullish side Tim? Also as I wrote yesterday in 2000 there were 2 break outs to higher territory one lasted 6 days and one lasted 4 days. Then they took the bulls to the cleaners.

Tim Knight said...

I was sort of anticipating the "if Tim is bullish, then it's all over" stuff. And that's probably fair! I imagine if God reads my blog He'll be more comfortable taking a few thousand points off the Dow now. The bears can thank me later!

costas1966 said...

I tell you there are some good things that will come for being bullish. First you will be loved by all people. Everyone loves a bull!!! Secondly, Hurricane5 will become your friend, he will stop being a nuisance and he will invite you out to a titty bar for a drink.

PB said...

Coincidentally, Michael Khan, another supposed bear, is also noting the bullish side on his Getting Technical column in Barron's. This market is losing all of it's bears! The top is oh-so-near!