Thursday, March 6, 2008
Wednesday, March 5, 2008
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
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.
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
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.
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:
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.