Now dont get me wrong friend, I am not bearish, but I am a little cautious seeing these gyrations this week. I will be all over a retracement to the 20 day moving average on the daily chart. Thats about 200 dow point lower. So well see what happens, I will trade long but very light.
As I said it's NEVER wrong to be cautious as long as we're not being too apocalyptic and anticipatory. Boy I know I paid my dues with puts expiring worthless and covering short hedges deep red. But then again, it's all about conserving capital.
Agree totally with both of you. I don't think we crash here, but this straight up action on such a narrow list of 3 letter stocks is a self fulfilling type of thing. The path of least resistance is higher, but technically the breakdowns are glaring and not to be ignored. The mkt runs on cycles, always has, always will. As soon as we hear this times its different? sold to he or she!
BUY BUY BUY BUY BUY BUY BUY BUY BUY The Bull's Broad Shoulders S&P thinks the number of sectors participating in stocks' multi-year advance is a bullish sign, and suggests that the market has further upside by Mark Arbeter From Standard & Poor's Equity Research Investing The stock market's torrid upside pace may be starting to flatten a bit as investors catch their breath. With the all-time high for the S&P 500 so close, there may be some sort-term reluctance on the part of investors. However, we think it is only a matter of time before the S&P eclipses the March, 2000, high. Taking a few large steps backwards, and getting away from so much focus on all-time highs, and looking at the bull market from its beginning, we find a remarkably broad advance when we drill down to asset sizes as well as individual sectors. Since the October 9, 2002, bear market bottom, the S&P 500 is up about 94%. The NASDAQ, which dropped a lot more than the blue chip indexes during the bear market, has risen about 131%. But the real winners since the 2002 low have been the smaller stocks with the S&P SmallCap 600 up about 153% and the S&P MidCap 400 up 139%. Taking a look at individual sectors reveals some interesting performance numbers. Seven out of the ten S&P sectors are beating the return for the S&P 500 and those seven are all up at least 100% from their respective bear market lows. Some of the sectors bottomed out in July, 2002, September, 2002, February, 2003, and March, 2003, and we measured returns based on the individual sectors bear market low. The best performing S&P sector, since its July 2002 low has been Energy, soaring about 204%. Energy stocks did not get hurt as much as the major indexes during the bear market, so its outperformance is not due to a strong snapback like some of the other sectors like technology, utilities, and telecom. We think it has more to do with the fact that energy stocks had been laggards vs. the S&P 500 for almost all of the 90's, and represented a new leadership group following the bear market. Sector leadership many times changes from bull market to bull market. After energy stocks, utilities represented the second best performing sector, surging 179% since the bear market low. Utilities also underperformed the S&P 500 during the 90's and got pounded during the bear market, plunging over 50%. Material stocks have the third best bull market record, roaring ahead by about 140%. The sector badly underperformed the benchmark from late 1994 until late 2000. Information technology was fourth, recovering 119%, but remains well below its 2000 highs. Telecom, which had gotten wiped out during the bear market, is up 117%, with Industrials and Financials next, both up a little more than 100%. The three sectors that have underperformed the S&P 500 are Consumer Discretionary, Healthcare, and Consumer Staples. Healthcare and Staples are considered defensive sectors, and many times do better during tough overall market environments. The broad sector participation is bullish in our view, and suggests that the market has further upside. It is only when participation becomes more selective -- large cap technology stocks in the late 90's, for instance -- that we will become more worried about the staying power of the bull. In our last comment, [LINK]TEXTHERE, we took an in-depth look at the American Association of Individual Investors (AAII) sentiment poll. Despite the strong stock market environment, sentiment from this poll was showing some highly unusual readings of only 29% bulls and a whopping 54% bears. These readings are much more typical of a market that is in a corrective mode, than one that is heading higher on a very regular basis. Last week's sentiment numbers were a little more "normal," with an even split of 43% bulls and 43% bears. This is still far from the bullish extreme often seen at market tops where bullish sentiment rises to 60% or above and bearish sentiment falls to 20% or below. We wonder how accurate the numbers were from two weeks ago. Unlike the AAII poll, we are finally starting to see some examples of sentiment that is starting to get a bit frothy. On May 7, the total CBOE put/call ratio was 0.70, the lowest since mid-December. The equity-only put/call ratio fell to 0.45 on May 7, also the lowest level since mid-December. Granted, these are only one-day occurrences, and when viewed from a 10-day or 30-day perspective, these ratios are still above levels that have preceded corrections in the past. The ISEE Sentiment Index also rose to its highest level since mid-December, but is no where near the levels that have been associated with intermediate-term corrections. The slope of the advance seemed to tail off a bit over the last week, and with the negative price action on Thursday, May 10, it is possible that we will finally see a pullback that lasts more than a day. The first zone of support [GLOSSARY LINK] sits around the 1480 level and is fairly minor. There is some chart support in that area, and it also represents a 23.6% retracement of the rally since the closing low on March 5. More substantial chart support comes in down at 1460, as this was the prior high from back in February. The 1460 level also represents a 38.2% retracement of the recent rally. Technically, the market is overbought on a daily basis and may need to pause to work off this condition. The 14-day relative strength index (RSI) has popped back up near 74 for the second time in the last two weeks. For the most part, the 6-day RSI has been north of 80 since the middle of April. The 14-week RSI was approaching an overbought condition, but has more room on the upside, in our view. Many intermediate-term advances do not end until the weekly momentum indicators become overbought, and then trace out a series of negative divergences. We think we are weeks, if not months from that occurring.
I love the DJ30 stocks. This garbage gets bid up like tech stocks in 1999. C .. +4% HPQ .. +2.8% JNJ ... +2% MCD ... chart looks like a straight line... +1% PG .. +2% Boy do we have classic bull market leadership. JNJ and PG!!!! When was the last time these kinda junk stocks pull up the market???