Thursday, March 6, 2008

Equity Market Comment - 3/6/2008

Today was certainly about as far away as what I had anticipated that it was actually the complete opposite of what the models dictated.

However, given some of the characteristics of the decline today, it remains very difficult for me on a technical basis to march into the bearish camp and surrender.

The volume on the decline today was hardly what most supposed bear markets would put out on a decline of this magnitude. The sentiment both on a short term and intermediate term remains very bearish, which is a very strong bullish vote in our corner. The most recent polls amongst all of the monitoring services show a large degree of disparity among the ranks of investors. The levels that these ratios are achieving are the same if not worse than the 2003 low in the market. These levels are not bear market levels and are indicative of a market that is in the process of putting in a major low.

As you know, I have subscribed to the notion that the 1270 low on the S&P 500 was the ultimate low for this recent move lower and that it should stand up to any test we may encounter. Nothing so far has changed that outlook. If we have entered a period of the market making a test of these lows, which we knew would come at some time, then the action we saw today is encouraging for our outlook. The key to this entire re-test will be the amount of volume we will see and today was right along the lines of what you can expect on the volume front.

So, in a nutshell, the market may be in the process of a re-test of the lows, but with the vast amount of negative sentiment currently in the market place we should look at any pull back in stock prices as an opportunity and not a curse. The always present bottom test was exactly why I did not go full throttle with the allocation to equities and currently we remain with our cautious 50% to 60% allocation towards equities. As I have stated in the past this allocation will increase as the technical work dictates.

Wednesday, March 5, 2008

Don't Forget To Vote!



Equity Market Comment - 3/5/2008

Quite a day traders dream market today with the volatility.

In the end, the bulls won the battle, but the war is far from over.

The Trading Model calls for higher prices yet again for Thursday and should there be weakness in the first hour of trading, it is also saying short term traders should buy the dip.

Not really much has changed since the analysis of yesterday.
I continue to look for short term and intermediate term higher stock prices.

The only real change from yesterday is the indication that Friday should see a corrective move on Friday.

The reason I bring this up is the effect this call has on Thursday. In order for this Friday model call to remain strong, it will require a strong to very strong Thursday. So, should you see a 0.75% or higher move to the upside tomorrow use this as an opportunity to take short term profits.

The Nasdaq has been pretty much following the line we thought it would as it shows more strength than the S&P 500. Look for this trend to continue as the battered tech stocks come back to life.

One more quick note is that the Airlines Index is starting to get bullish again, so aggressive short term traders can look for some opportunity here. We took a very nice profit out of it about 3 weeks ago and should things progress as we see them, then this next move up in XAL could be even better. This is a risk play however and thus is intended for aggressive risk adverse traders only.

Tuesday, March 4, 2008

Gander Mountain Update

No real progress in GMTN as we had a very narrow ranged day.
Days like this do tell us something. They tell us that the stock is about to make a sizeable move in one direction or the other.

Remain flat until it tips its hand on which way it wants to move and then climb on board.

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.

Monday, March 3, 2008

Gander Mountain Knocks On The Door Again

It appears the decision to lock in profits on the Gander Mountain trade was a good one as the stock has move all the way back down to the breakout point and currently is resting on the long term trend line.

This offers some potential for yet another long trade.
If GMTN can bounce from here and close back above the trendline, then we will have potential for a very bullish move higher.

This trade also offers some very limited risk as we are right at the trendline and a bounce off of this line will be the trigger to purchase the stock, with a very close stop loss just under the trendline. Risk should be no more than 5%, but it is important that you have the stop loss in place once you are long the stock as a failure of this pattern may lead to a re-test of the $4 area.

Equity Market Comment - 3/3/2008

The market action today followed fairly well with what the probability model predicted, with a lower open to be followed by a late day rally and a neutral close.
It is also quite bullish that after a more than 300 point down day the previous session, the market was able to level off and not have downside follow through on the close.

The seasonal model calls for Tuesday to be a very good day on the upside and it is this exact type of day that the market desperately needs in order to keep the intermediate term trend from turning negative.

The Models Components are as follows:
6 Bullish
2 Neutral
0 Bearish

Today was also in the time window for the change in trend date, so there is a very high probability that a low was put into place today.

The great thing about all of this is that if a strong Tuesday should come to pass, it will take the probability model into very bullish territory and we could finally see a breakout of this trading range we have been in for quite some time now.

No question that there are some real short term concerns here, but sentiment remains very bearish and the market remains in a very favorable time for higher stock prices.

Currently the long term allocation remains at 60% invested and this reflects some of the concerns I have for this market. However, as we continue to get favorable signs for higher stock prices, this allocation level will move up.

Trend Analysis LLC Headline Animator