Tuesday, April 04, 2006

Going Nowhere Fast

Yes, I know the market was up some today. And it was up some yesterday. But the fact is that this market is stuck without any clear direction - either up or down - and it's maddening.

Here is a chart of a true trending market; this was back in 1995 and the first part of 1996. The market pushed higher, virtually uninterrupted:


Here, on the other hand, is the recent history (intraday) of the S&P 500. Up. Down. Up. Down. Churn, churn, churn. It's going nowhere fast.


Why is this? Well, one reason is that in spite of all the talk of "5 year highs", the market still has a fair bit of overhead resistance to conquer. Even the Dow, which is nearer to historic highs than any other major index, isn't out of the woods left. Notice the highlighted area representing overhead resistance, and it's no wonder earnest attempts to push higher get repelled.


The market hasn't had any reason to move up or down in a meaningful way. Even though I'm a technician, I admit that earnings do drive share price, and there will be a lot more clarity in the coming weeks whether the market is going to shake off the doldrums and blast higher or if it'll succumb the the pressures of a tired bull market. In the meantime, feel free to share your own views and specific recommendations in the comments section.

10 comments:

Hurricane5 said...

You want a specific recommendation? I'll give you a stock that will actually make people money. Symbol NTRI. Nutrisystem. This stock will see $80 in 2006. It will likely jump 10%+ the day they report Q1 late this month. It closed today at $48.15. It has gone up 8 straight points without a single down day. I'm justing waiting for you to say it has "topped out" again. It might pull back 1 or 2 points just like all other stocks, but that is normal. There are no interstates in this business, just winding roads that don't get there as fast as we would like. And crying kids in the back seat makes us stop and get out from time to time. But, in the end, NTRI will reach its ultimate destination of $80 in 2006. You heard it from me on April 4.

Tim Knight said...

Excellent! I'd love to hear other recommendations.

Kapil Khanna said...

Looks like the intermittent bottom on friday is getting confirmed with todays market action. Its heading for its prior intermittent top. It seems like there is still a lot of selling that comes in at these levels. The good thing is, its being absorbed.
The international markets have been rocking lately, which makes it hard to commit large positions at these levels. If the market does break this overhead resistance, we should see a lot more money flow into the markets.

Mike Stone said...

It's hard work being a bear. I was hoping for a nice tasty correction in March but it didn't come. There was weakness yesterday
and strength today.

A watched pot never boils. I'm gonna try being bullish to see if that'll "jinx" the market into a crash.

-sigh-

-Mike

costas1966 said...

I am quoting from a reader earlier.
" If the market does break this overhead resistance, we should see a lot more money flow into the markets." Everyone is anticipating and can't wait for the break out. They say when the market breaks out a whole wave of new money will come in and they can't wait to get exited and overinvested. History tells us though quite the oposite. At this stage of the game break outs are prone to fail. They are bull traps and there is not a reason to get overexited over them. Have a short list ready when they happen you will be better off.
On my blog I have the chart of the S&P 500 in 2000. The market was acting very similar as it is now. Churning going nowhere fast and it also had 2 break outs that cleaned out a few long acounts. Here is the chart for whoever is interested. http://xrysos.blogspot.com/2006/04/at-this-stage-of-game-break-outs-do.html

costas1966 said...

I am quoting from a reader earlier.
" If the market does break this overhead resistance, we should see a lot more money flow into the markets." Everyone is anticipating and can't wait for the break out. They say when the market breaks out a whole wave of new money will come in and they can't wait to get exited and overinvested. History tells us though quite the oposite. At this stage of the game break outs are prone to fail. They are bull traps and there is not a reason to get overexited over them. Have a short list ready when they happen you will be better off.
On my blog I have the chart of the S&P 500 in 2000. The market was acting very similar as it is now. Churning going nowhere fast and it also had 2 break outs that cleaned out a few long acounts. Here is the chart for whoever is interested. http://xrysos.blogspot.com/2006/04/at-this-stage-of-game-break-outs-do.html

PB said...

The economic cycle hasn't been broken yet, so to be looking for higher highs at this point is very risky, there is only 1-2% MAX upside left in this market, it's gonna try a few times to get there, but the message from the fed will slowly sink in. Rate hikes will NOT stop until the market breaks! Since spring 2004 this market has done didly squat! You'de be better off in cash on a risk adjusted basis. We've all heard this before, but I'll say it one more time, the current bull run is long in the tooth and the odds favour a pullback rather than new all time highs. Time will tell.

PB said...

ok, here is a nice short, symbol NEW (New century Financial) currently a touch above $46 (stop at $49-$50) over-exposed to the housing bubble through sub-prime mortgages. Will sell-off with the market

NO DooDahs said...

Intraday, the movement of the last few months or so is basically equivalent to the intraday movement of the S&P 500 in late 1995 and early 1996. Download the data and graph the 63 DMA of the intraday range divided by the previous day's close and you'll see what I mean.

Likewise, in the first quarter of 1996 you had daily pullbacks in the S&P 500 index of 3.1%, 1.8%, 1.5%, and two others above 1%. What's the biggest daily pullback of 1Q 2006? 1.8%, and only one other day pulled back 1% or more. Early 1996 was more volatile than early 2006 has been.

PB said...

Hey Tim:

is OIH a short a these levels?