9 reasons to expect a short-term rally this week
With our mantra of “market, sector, stock, and dynamics”, let’s check out
where we are, before considering where we might head. We might also consider
this in terms of some general market themes.
“Winners live above the 200 day moving averages and losers live below.” The NDX
and the Russell 2000 are hanging on by a thread above their 200 day averages,
while the Dow Jones Industrials and the SP500 have slipped sub the 200. The
Industrials’ point and figure chart also broke its support triggering at 10300.
This makes a lot of sense in assessing relative strength, with only Dow
Industrials’ components showing relative strength > 70 for either 6 or 12
months.
What has worked has been commodities (at least up to this point), with strong
moves by Phelps Dodge (copper), Silver Standard Resources (silver), and GLD (the
gold ETF). The Nasdaq Biotech Index remains above its 200 day moving average,
and it remains to be seen whether Big Pharma will try to recover by M&A activity
on small cap biotechs with repatriated dollars.
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