Stocks did a nice job of confirming all the hammers that were made yesterday. Now there are a lot of morning star-like (many are missing the gap btwn days 1 and 2, but they’re close enough for govt. work) patterns in individual stocks, especially on the NASDAQ. For its part, the NASDAQ index was able to jump back over its May-November trendline and its 50 day moving average. While there have been some very tradable swings on the NASDAQ, it’s just been marking time since October. I pointed out before that the NASDAQ was in danger of building a head & shoulders top if it didn’t take out its November high and I still think that’s the case (or some other kind of top). I think if it can’t surmount that old high it may drag the rest of the indices back down into the muck. But for now I think it’s a good bet to think that the NASDAQ will at least test that old high.
Here’s the chart of the QQQ:
Oh yeah, the Dow made a new 52-week high with its first close over 10,000 since May, 2002. My guess is that a fair number of bears have gotten themselves trapped by the action the last 3 days or so. I’m sure many people expected the Dow to roll over and play dead like the NASDAQ did when it hit 2,000 last week. Let’s see if we get any panic buying from the trapped bears.
Still making my paper trades on the QQQs; got in yesterday around the lows and have a nice little chunk in the green. Still not comfortable throwing real money at this thing yet, though. I want to see what happens when the trend reverses and see how I survive. I tried going short last spring and kept getting spanked, so I think I’ve got that “let the trend be your friend” thing down. My favorite indicator, the Vix, is still in an upward trend over the past few weeks. Can’t help but think if all those people are scooping up the puts at the first sign of danger, there’s not much confidence in this rally.
Tom,
Seems like you’re nailing these turns. I think it’s time for you to put some real money to work!
Interesting VIX chart. I wonder if it’ll hit 15 on this little turn.
I’ll feel a lot safer if the vix starts setting new lows again.
One thing the bears gotta get a grip on: the fundamentals for another swoon aren’t going to be there like they were from march 2000 to march 2003.
Something to chew on: the S&P 500 is right about where it was in the spring of ’98. That’s a flat showing after five years. If we calculate the bear market starting then … with the Asian financial crisis … vs. march 2000, then perhaps we can say we’re a lot farther along in this bear than a lot of people think, and maybe closer to its end. (Could be argued that the runup to 2000 was a liquidity-fueled aberration that was quickly corrected)
I realize that by historical standards we never had the capitulation, low p/e’s, high dividends and widespread hatred of stocks associated w/the end of a bear market. And we’re still parallelling the experience of the Nikkei/Dow ’29, both of which had huge rallies about three years after the crash.
The other side of the coin is that in years past large financial companies didn’t have the computer models that allowed them to manage their risk via derivatives … given that playing the market is almost entirely a business of accurately assessing risk, and that these risk-abatement tools never existed during previous eras, it might be that we really are in a new era this time.
But I wouldn’t bet the rent check on it. My gut feeling is this rally peters out next year some time, that car/home sales crater and give us the double dip recession many expected this year.
People are still in hock up to their eyeballs and the Fed is out of bullets, so there’s plenty of reason to be skeptical.
Saddam rally being sold. What’s that tell you?