Friday, May 05, 2006

Strength Begets Strength

Ugh! OK, the bulls are completely in control of this market. Bulls everywhere - be they oil bulls, precious metal bulls, stock market bulls - have the world by the horns. We bears better hide in our caves and peek out until the weather is better for us. This is nasty!

The Dow is just a couple of hundred points away from its lifetime high, set in January 2000. The green stripe here illustrates how close the lifetime high is. It's hard to believe in 2002 we were 3000 points lower than this.

The S&P 500 has smooth sailing, from the Fibonacci perspective. As the shaded area illustrates, there's about 4.5% left of "open air" until the next Fib is hit. This index has shown amazing power and resilience.

If you need any evidence that the stock market is once again very visible in the public eye, look no farther than the home page of CNN.....

....or FOX news. One might consider this a contrary indicator (witness the manic coverage about stocks in 1999), but who knows. It's impossible to know what a market's really doing except in retrospect.

One other very bullish signal is that the American Major Markets index ($XMI) finally broke above its inverted head and shoulders pattern.

My difficulty with this market is that there simply aren't any bullish chart patterns that I like. There are certain stocks which seem to keep pushing ever higher (take a look at HANS, for instance). But I just can't get comfortable diving into something which is already up hundreds, or even thousands of percent.

This market puzzles me. But one thing is sure: the bulls are in charge, and, rational or not, the market just keeps soaring.


Hurricane5 said...

I'm open minded no matter what market we are in. If it's a bear market then I'll buy puts and sell short. If it's a bull market then I'll buy calls and buy long. The object of the game is to make money. It's much easier to make money if you go along with the direction of the market. This is a bull market and there are plenty of excellent stocks out there to buy. GOOG, NTRI, NXG, TIE, HANS, GOL, ZOLT, just to name a few. It's ok to buy stocks that are at or near their 52 week highs. And for those who like to buy stocks well off their highs then consider initiating a position in GOOG.

TryumphTrader said...

Tim - permabear is waffling in his predictions? I seem to remember that your bearish sentiment was a bit longer term than just the beginning of this year. ;)

Tim Knight said...

I'm not waffling. I'm just temporarily throwing in the towel. I have no long recommendations at all at this point. This market is just too insane for my liking. I'm in "wait and see" mode for now.

Hurricane5 said...

Tim, I am not sure how you or anyone else can argue we are in a bear market. This is not some kind of contest. You play the game to make money. It is important not to manipulate the data to make it say what you want it to say. One must interpret the data in an impartial manner. Once the bull market is over, I will be shorting the overvalued stocks. In a bull market we buy, and in a bear market we sell short. You make money no matter what type of market it is. There is no point on sitting on the sidelines until change from bull to bear or vice versa. You can make money no matter what type of market we are in.

cristri25 said...

at this point i could not consider going long anything. being a bear did suck this week.

some bullish indicators are out there ... but look under the hood and its just okay; the nasdaq is not leading this rally. most stocks in the nasdaq 100 are breaking down. Look at ebay today. the sox is just okay.

the volume today was nothing great.

cristri25 said...

one thing ... this market can turn fast and break hearts of bulls just as it has for da' bears.

not gonna fight the tape.

Chris Berte' said...

A wise man once said, that the Bull rally won't die until the last Bear is converted into a Bull.
Tim throwing in the Bear towel? Could this be the sign? The End of Days is upon us...

John Wheatcroft said...

I don't believe you can tell anything of importance regarding market direction from daily views. Try a weekly view of the SP500. What you will see is that we just entered overbought conditions using Fast Stochs and StochRSI and we aren't quite to oversold using RSI. The fact that we could stay in an oversold condition for quite some time is very apparent from the charts. What is very interesting is the 200 day simple moving average. I use this gauge frequently in my own trading, anyone who is playing stocks below the individual 200 day are speculating. Any way, the 200 day doesn't move very quickly from negative running to positive running (as may be expected) and it just turned up last July. It is currently about 1090. It is possible that it could return all the way to 1200 before the next bear market begins. That could take 6 to 12 months.

Note the words "it's possible". And Chris, the Bull never dies - and only the Bear needs a long sleep.

Don't give up Tim - the market might not be going down but I guarantee that you can find dozens of stocks that will be.

Kapil Khanna said...

In your case, "The wait and watch approach" is great, if you can live with the following and keep your cool:
Dow hits 12000, 13000 & possibly 15000. I am not saying it will, just that can you keep your cool during this period waiting patiently for a reversal to confirm?

cristri25 said...

wEDNESDAY 2:15 IT could reverse.


or not.