One Dilemma About This Market…

What
more can I say about this market other than it appears solid!  We
saw good support from the NASDAQ in Wednesday’s trading.  The index bounced
off its 20-day moving average as volume increased from yesterday. 

 

 

 

Leading stocks have also been
acting quite well as names like CME have broken out and achieved strong gains
in only a couple of weeks.

 

 

One dilemma I have about the
current market is that we have seen this before.  In the past couple of years,
there has been more than one occasion where the market has shown overwhelming
evidence of accumulation, or distribution for that matter and gone the
opposite direction.  Take the fourth quarter of 2004 as a recent example.  The
market rallied sharply before entering into what appeared to be a mild
correction in early 2005.  This correction took prices lower than we expected
and completely ended some of the runs in various leading growth stocks. 
Apple (AAPL) is one of those names that has yet to recover.  CME is
one the reset its base count and recently broke out as mentioned above.

 

 

Success has been found in
this market by purchasing names with strong odds behind them.  Rather than
going after the highfliers, strong names with prior uptrends have produced
strong results.  Google (GOOG) for instance seems to be leading the way
of the last two strong market moves we have seen.  Previously, in August of
2004 and the current rally.

 

 

Another strategy worth
employing revolves around ETFs in leading indices and even covered call
writing.  The key is to still keep a strong mindset of protecting capital, but
give yourself a chance to make some money and simply use a stop-point where
cutting a loss and moving on is prudent.

 

Tim Truebenbach