Remember This About Bull Markets

  • November 30, 2004
  • Tim Truebenbach

If
you pay close attention to the media in regards to the market, such
as watching CNBC or reading newspapers; you will notice that they are very
good at feeding the fire.  If the market is rising, they can’t stop talking
about all of the positives behind the move.  Likewise, if we see the market
drop, you will hear people talk about every negative aspect.  One thing to
remember is that Bull Markets do not just rally with the feeling that
everything is fine.  They usually climb a wall of worry such as the NASDAQ has
currently been doing.  Today’s action resulted in further consolidation as the
index faces resistance around 2,150. 

 

 

I brought up the initial
point in order to keep us focused on what the market has already told us it
was going to do: Move Higher.  We have seen constant accumulation since
September.  We have also watched quality growth stocks with strong earnings
post very strong initial gains.  These names include Google (GOOG),
Travelzoo (TZOO), Apple Computer (AAPL), Bebe Stores (BEBE)
among others.

 

 

We have seen very healthy
action out of the market as it rallies and then pulls back or consolidates. 
One indication that always had me worried in the latter part of then 1990’s is
that the market would not pull back, but simply continue higher.  We all know
what eventually happened.  This market is not doing that.  We are seeing
pullbacks and consolidations on the way up.  Take a look at the NASDAQ from
10/6 to 10/25:

 

 

We are not only seeing the
overall market produce this positive action but individual stocks are also
taking “time-outs” from gains to work off excess before moving higher. 
Ebay provides a great example as it advanced from late October to early
November.

 

 

During these consolidations,
stocks are able to establish new base patterns from which to move higher.  We
currently see Netease (NTES) doing this.  It appears to be building a
handle just shy of its double-bottom base pivot point of 58.59.

 

 

We continue to believe that
the market is moving higher in the intermediate-term.  By taking in the
market’s action and focusing on the strongest stocks and sectors with superior
fundamentals we also believe the most amount of money can be made.

 

Good Trading!

Tim