Keep a Long Bias This Week
The S&P 500
cash index finished off about a point yesterday, with the Dow off 15
and the NDX (Nasdaq 100) up 9 for another record close. Again. It was a dull
session, with only 723 million shares trading, and only a little bit over 13,000
institutional blocks of 10,000 shares or more. What did stand out was that they
couldn’t take the averages down as the Generals had many supporting working
orders and there was very little pressure on the sell side. They say when you
can’t take them down, they will usually go up. Keep a long bias this week and
stay away from the short side, which is obviously a very low probability trade
at year-end.Â
| “… regardless of what bonds do over the next few days…the reinvestment period in January will dominate.” |
There were a few outstanding afternoon
snapbacks, such as Yahoo! [YHOO>YHOO], with a 50-point rally, and CMGI, with
a 37-point move. I’d say someone had an agenda with those two stocks. Some of
the drugs followed through, such as Merck [MRK>MRK], Bristol-Myers Squibb
[BMY>BMY], and Johnson & Johnson [JNJ>JNJ], as the analysts started
ringing the value bell. It is: growth to value to growth, in order to keep the
game moving in the right direction, which is up.
The long bond reversed the October low,
and closed above the high of the low day, which gives us a short-term change in
direction. Hopefully, it’s more than that. If it doesn’t hold, it tells you that
there is a strong interest rate rise sentiment out there, and to proceed with
caution. However, I think that regardless of what bonds do over the next few
days — barring a disaster, which you don’t see in the cards — the reinvestment
period in January will dominate. But after that, it is jump ball regarding a
pullback or retracement of part of the 18.6% rally from the recent October low
of 1234. What a coincidence: The S&P 500 is up 18.5% since Jan. 1. It’s
amazing how that happens.
| href=”file:///C:/query/indicators/commentary/43-771.cfm?link=43-771″>Program Trading Numbers | ||
| size=2>Fair Value | size=2>Buy | size=2>Sell |
| 17.70 | 18.90 | 16.80 |
Pattern Setups:
I’ll give you more stocks than usual
today because these are all the key stocks that the Generals will be involved
in. CMGI [CMGI>CMGI], GE [GE>GE], Cisco [CSCO>CSCO], Microsoft
[MSFT>MSFT], EMC [EMC>EMC], Intel [INTC>INTC], American Express
[AXP>AXP] (above Friday’s high), and also take a look at Broadvision
[BVSN>BVSN], Xilinx [XLNX>XLNX], BMC Software [BMCS>BMCS], Applied
Materials [AMAT>AMAT], Texas Instruments [TXN>TXN], and Omnipoint
[OMPT>OMPT]. A lot of those stocks are right up at highs and had long ranges
yesterday. So be careful, probably take the second entry. If you take the first
entry, take half of your position. But most of these trades will probably be
second-entry trades as they shake out some people on the upside, take it down,
and then take it back up again. That’s what’s been happening on most of these
higher-priced stocks. If you take that continuation entry, take it and ride
it.
Have a good trading
day.