Here Are A Few Things I Would Love To See
On my last appearance on FOX News Channel, I stated that I thought
the rally would carry into the 8300 area where there was a wall of resistance. I
was simply using the lows of 10/29, 11/13 and 12/31 for the Dow. Emotions ran
high as the market broke through it…for a day. It seems to me that this rally,
near-term, could now be over. This does not mean we get cheesed from here. It
just means we are now going to pull back. I will know more about the pullback
when I see volume and the market’s ability to now hold support.
I say this because once again the bulls and speculators are already out in
droves. Just a couple of weeks off of a multi-year low, I am seeing things I
don’t want to see.
A) Sentiment, which
was recently bearish, has now turned decidedly bullish. The VIX and VXN have
plunged. This means complacency is already back in the market. Bullish
advisors (aka “the wrong-way crowd”) are at a multi-month high. These dudes
never get it right.
B) Speculation is
already getting out of hand. Amazingly, I am seeing 10 cent stocks going to
$2.50 because the company may or may not put out the oil fires in Iraq. I am
seeing $2 internet stocks going to $3 in a day. How many times have I told you
in the last three years that when a “real” new bull market starts that
speculation will be absent? This is the way bear markets end…not with 1000
point rallies…not with excessive speculation…not when every one hears the
bell ring. It is my contention that bear markets like the one we have been in
end quietly…or at the very least, they retest and retest the lows wearing
people down.
Yes, leadership has been
showing up. Yes, the market has put in a good effort. Yes, volume patterns have
been good…BUT, I have this sneaking suspicion there is more work to be done. I
would love to see:
- Light-volume
pullbacks into support.Â
- A few weeks of
just sitting at support. This would let bases form out better.Â
- Bearishness pick
up as the average investor gets driven away from what is perceived as a lost
cause.Â
- Doubt pick up as
the market slowly moves off support.Â
- The New York
Knicks winning their last 12 games and get into the playoffs. Oh, never mind.
Stay out of the playoffs and win the Lebron James sweepstakes.Â
- Most of all, a
quick end to what is now becoming a much tougher war than most of us thought.
MAY GOD BLESS OUR MILITARY!
Stay safe and protect
your wallets.