Tuesday, August 25, 2009

Overbought / Oversold Stock Indicator Shifting to Moderately Short

With the market showing continued strength after last week's decline, our Overbought / Oversold Stock Market indicators are flashing warning signs. By the close of today, based on current prices, they will flip from long to moderately short. Our long-term and short-term indicators remain long. This is just a sign that traders should be cautious at these levels based on the recent market action.

Long-term investors should continue to do what they are doing (and avoid churning their accounts and building up commissions).

Tuesday, August 18, 2009

Current Stock Market Indicators (Bullish)

  • Longer-term models -- moderately bullish
  • Short-term models -- currently bullish, especially with market calling higher
  • Overbought/Oversold indicators -- bullish; these models don't currently "believe" in the "bearish themes" out in the marketplace.
As always, let the market action and "tape" dictate your investing and trading positions.

Thursday, August 13, 2009

Runaway Markets: Technical Analysis and Fundamentals

The stock market has been in a sustained rise since its March lows. Using 20-20 hindsight, people have said it was an inevitable bounce from scary lows, followed by a short squeeze that lasted longer than expected (due to the excessive fear and shorts in the market). Whatever the reasons, equities have been in a runaway market for almost six months now -- with the S&P rallying an amazing 50% in just five months!

We agree with many naysayers -- that our global economy isn't the greatest -- and that this might be a bear market rally. However, we are technical traders and our mentality is to "shoot first and ask questions later." Emotions can really move markets and cause them to overshoot -- often past where fundamentals might dictate. For the most part, our trading systems have kept us on the right side of the market (stocks, bonds, currencies, etc.) during this rally. We don't "fight the tape" -- and let the markets direct our actions. We believe that emotions and technical action move the market in the intermediate and short-term, but that fundamentals move the markets in the long-term.

We're wary of the direction that the world's economic fundamentals will eventually move the markets, but hope that our technical approach to the markets will keep us on a good path.

Monday, August 10, 2009

Sugar Market

The sugar market is hitting multi-year highs because of weather concerns (in India and other places) that are creating supply worries. This extreme move is helping our portfolio to edge higher as other markets churn at current levels. You can never tell which market sector might perk up -- so it's good to use trading systems that cover a wide range of market sectors.

In the meantime, other markets have been churning since they reached certain levels. The stock market has reached recent highs but is struggling in the 1000 range on the S&P. The bond market has been bouncing between recent support and resistance. Other markets such as currencies and other commodities have recently had similar market action as well.

Thursday, August 6, 2009

More Contrarian Signs of a Top?

The other day, we saw that Goldman Sachs was calling for an end to the recession. Recent economic news has been cheerier. And -- most importantly -- the majority of financial news headlines and market calls have changed!

Up until recently, almost every market call by analysts was a return to the scary march and November lows. NOW -- we see that analysts are pointing to upside potential of 1070 from its current 1000 on the S&P. Some analysts are even calling for further upside of 10%-20% more!

The change in opinion could mean that we're finally due for a market turn. We hope that we don't see a return anywhere close to the March or November lows -- and do, indeed, see an end to the recession -- but we are also wary of the change in atmosphere. Markets don't continually go straight up or straight down. The pendulum will eventually swing the other way.

Wednesday, August 5, 2009

End of Recession? Or Contrarian Sign of a Top?

This stock market has been mighty resilient. Several times over the past few weeks, the market has "called down" overseas -- only to rally during US market hours. The market has gone straight up despite most people predicting a return to March lows. Recently, Goldman Sachs has been calling for an end to the recession / depression.

Indeed, many analysts and economists point to the stock market bottoming about 6 months before the end of a recession. Previous recessions have seen the market bottom anywhere from 4 to 10 months before the "official end" of their associated recessions; the average has been 6-7 months. The analysts view the March stock market lows as "The Lows" for this stock market cycle and project an end of the recession to be around September or October. What a turnaround from the doomsday scenarios we have repeatedly seen since November's lows.

We'll be back with more contrarian views of a short-term top.