Deal With The Present
The world did
not change over the last week. Many companies are pre-reporting poor
numbers and outlooks. All the talk is about recession, war and terrorism.
Layoffs continue at an amazing pace. The list goes on and on.
There is one very important change that has happened…that is the action in the
market. I have said numerous times during past reports that you can’t hide
institutional selling. Well, you can’t hide institutional buying either. I am
not one of these geniuses that can guess whether this is the start of a new
bull. I have no idea how far it goes and certainly no idea how long it lasts. I
do know that the Dow, S&P 500 and now the Nasdaq have all had follow-through
days…and Wednesday’s volume was especially powerful and cannot be
ignored.
But, as always, there remain things to think about:
- Looking at long-term charts, this
is still a rally in a longer-term downtrend. - There remains a small list of
breakouts. As I have stated, I expect any rally would be led by those stocks
that have been hit the hardest…especially in Tech
Land. Most are way below their moving averages and have a lot of work
to be done. - Resistance is straight ahead. You
are right in that area for the Dow in the 9100-9300 range…the S&P 500
between 1080-1100 … the Nasdaq has to still fill the gap from the Sept. 11
event. - Most importantly, please remember
the symptoms of bear market rallies. They are sharp, make you feel good, suck
you in, and end very quickly. Let’s hope for all the longs out there that
this time finally is different than other fake outs.
Getting back to the volume, I have
always put a great emphasis on extreme volume days, so I ask you not to fight
what has occurred…and I ask you to watch your short positions carefully, if
you still have some. I know a lot of us have been conditioned to be bearish
because of the horrid action in the markets over the past 18 months. Don’t let
the past sway you. Deal with the present and nothing else.
I am going to let the market dictate to me. If this does have legs, expect more
and more names to hit the New High List, which is my favorite. I believe odds do
favor upside testing here. Heavy volume days usually lend themselves to more
follow-through.
Keep in mind, this action can abort at any time. That is why it is so
important to watch the major indices every day for significant changes.