September Recap–The Positives And Negatives

  • September 29, 2004
  • Rob Hanna

 

 

Below are my
observations as September comes to a close…

 

Positive —

 

New Highs vs. New Lows
— Mark Boucher’s high eps/rs new high list has been consistently outperforming
his low eps/rs new low list by a wide margin.  Even with the recent pullback we
have seen, breadth is favoring the upside.

 

Foreign Markets —
On the whole, I would say that foreign markets have
been acting a bit better than the US.  There are a select few offering
leadership, including Belgium , South Africa, and Latin America.  There are also
several foreign markets that are quite close to breaking out to new highs. 
These include Brazil, Italy, Canada, Australia, Austria, and France.  Continued
strength in these markets would serve as solid confirmation of any U.S. rally.

 

My steadily growing
watch list — While the number of opportunities to
trade has been far below bull market levels, the number of new stocks appearing
on my watch list has been fairly consistent.  There are still a good number of
stocks setting up in bases, and opportunities should be plentiful if the market
begins to gain some momentum.

 

Neutral –

 

UUWNHI (Unnofficial,
Unscientific, Working/Not working Hanna Indicator) —
From a breakout standpoint, “working” must be measured by degrees.  I have seen
several names stage semi-successful breakouts and continue to stair step
higher.  What has been lacking is any great thrust behind the breakouts.  Quick
moves of 20% or more are scarce to say the least.  Rather, what I continue to
see in stocks that hold their pivot is moves of 5%-10%.  This decreased reward
on breakout trades serves to reduce the risk/reward ratio of the trades, and
serves as an important reason to remain ultra-selective with your trades. 
Breakdown have been hit & miss and the risk/reward there has been even worse. 
Without a strong trend, breakouts in either direction remain a risky proposal.

 


Accumulation/distribution — Price and volume action
continues to leave few clues.  Isolated days of both accumulation and
distribution can be pointed to over recent weeks, but there has not been any
steady pattern.  This is typical for a market that continues to blow in the
wind.  I would look for a few days in either direction before being convinced a
real trend may be emerging.

 

Negatives —

 

Sentiment
— Most sentiment indicators I track are saying the same thing — no fear.  Until
the last two days, the market has sold off fairly steadily of the last two
weeks, and still nobody seems to care.  To me this indicates that for real fear
to enter this market we may need to see a fairly severe selloff.  Whether that
happens anytime soon remains to be seen.

 

Wildcards
— Oil at $50/barrel, an upcoming election, an uncertain economy, terrorist
threats and a market without conviction all seem to be warning flags.  Throw an
upcoming earnings season into the mix and October has the potential to become
very volatile.  At the moment it appears that geopolitical and economic issues
may provide more stimulus for selling than for buying.  A market that rises in
the face of these issues could be very strong, though.  At this point we can
only watch and wait.

 

Best of luck with your trading,

 

Rob


robhanna@comcast.net

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