Signs Of A Runaway Market
Hedge fund pro and TradingMarkets.com co-founder Mark Boucher discusses how
he identifies “runaway” markets in his trading course, available on
the site. He looks for a series of gaps, lap and thrusts within a 21-day period.
If there are more than five, chances are you have identified the early signs of
a potential runaway market.
As the major indices pop to new multi-month highs, notice how there have been
more than this critical mass of five gaps, laps or thrusts within the prescribed
period. (A lap is similar to a gap, where the open — in an up market — pops
above the previous day’s close, but the current day’s low may overlap the
previous day’s high.) Any period of five consecutive up days also constitutes
one of the five signals required for the critical mass. We have had more than
five such signals in the last nine days alone in the December S&P futures
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The S&P 500 cash index is up 17.07 at 1135.40, the Dow is up 170.71 at
9723, and the Nasdaq Composite is up 38.92 at 1878.97.
The market has consistently been rallying on negative world and earning news,
also a positive indicator of market health and sentiment.
Most news pundits are erroneously touting the Taliban withdrawal from the
capital Kabul as a positive development. While it may be symbolically, the
withdrawal only draws allied forces into the traditional stronghold of that
oppressive regime in the rugged south. America is spending $1 billion a day on
the war and the pullout in no way provides an earlier completion date. Heavy
government spending on the war, increased fiscal spending to rev up the economy
amid a declining tax bas (GDP is declining), means there still remains a large
price to pay and heightens the chance of inflation.
The most speculative sectors of the market continue to lead: Internets
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+4.34%, networkers
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+4.17%.
The gold and silver index
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1%. Comex December gold futures
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ounce yesterday after safe haven buyers sold. Gold appears heavy out of a
head-and-shoulders top formation, a situation pointed out in
TradingMarkets.com’s “Nightly Futures Report.” Without signs of
inflation, gold will likely break the neckline of the pattern near today’s
low in the $276 area.