Tuesday, March 4, 2008

Equity Market Comment - 3/4/2008

Sentiment, both short term as the chart below demonstrates and long term remain on our bullish side with some wide spread disparity and some readings that have not been seen since the bear market termination in 2003

The 1 minute chart below shows the S&P 500 (Blue) and the CBOE Put/Call ratio for today.
Notice the heavy put buying from 2pm on and the market began to recover. This is an ongoing event just about in every instance and clearly demonstrates the very high level of bearishness amongst investors.

When does a down day become an up day?

When the market is in the process of a mini bloodbath and it manages to close well off those lows and actually show signs of buying outpacing selling for the day.

This was what happened today, and it is because of the very strong seasonal time frame we are in that it was even able to occur. While the action today was not what I had anticipated and certainly not what my models had suggested, it remains a fairly strong plus just the same.

The model for tomorrow is even more bullish then it was for today with all 9 components squarely in the bullish camp. This at the very least makes the suggestion that any downward pressure we might see on stock prices will be very limited and in all probability with the action today, Wednesday should be a fairly strong day for equities.

I remain attached to my theory of higher stock prices and not a new bear market. It seems as of late that I am just about the only bull left out here and that my comrades is a very very good thing.

I continue to hold a fairly conservative allocation to stocks as there are still quite a few benchmarks the market must clear before I can justify a more aggressive stance, take comfort in the very high probability that any downward pressure on stocks from here should be very limited and the path of least resistance is very close to turning up.

Continue to look for good solid bargains in the market, and there are quite a few right now, but remain conservative in your allocation with perhaps a 50% to 60% total allocation to equities.

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