investip

Wow!

Up 2.75-5.25% on the major indices today. Looks like we got enough of a “fix” out of Europe. Earnings, although somewhat mixed, didn’t seem to get in the way.

It’s not a good idea to chase them, especially since the market technically is overbought, and many charts look extended. If one were feeling left out, adding to laggards could work, as long as earnings are out of the way or seem safe. I’m also seeing a few good stocks not too far above trend lines.

Traders should take some off the table. Investors, aside from my comments above, should wait for trend line support to catch up with the stocks/funds on their buy list.

As always, email or call with questions (or answers ) Bob

What? Good Behavior?

The market is like a teenager; you can’t consistently predict its behavior. I rarely expect it to behave the way I want it to in the near term, but it seems to be consolidating last week’s run-up quite well, holding above 1200 on the S&P. Hoping for a Q4 move up, we like this action.

We’ve got another week of heavy earnings announcements. So far they’re coming in mixed, which I think was expected. If they continue mixed but with a few important really good ones I think we hold something close to current levels.

As well, lower levels of frustration from Europe should keep markets steady. There’s been some positive merger (Kinder Morgan and ElPaso) and spinoff (Abbott) news that helps the tone, too.

Now It Gets Interesting

We’re up another 2.4% on the S&P since my last post on Monday, and a total of 13.7% from the bottom on 10/4. Now we’re back near the top of the August and September trading range at 1225 on the S&P (but still off this years high of 1370, about 12% higher from here.)

Volume on this rally is still not great but there is very little else to complain about. (Actually, a lack of volume could indicate there’s still money on the sidelines.) We could easily go to 1250 before any kind of consolidation, although a little rest after a run of this magnitude usually extends the life of a major market move.

Q3 earnings reports really start to ramp next week and will control market mood. Although positive earnings expectations have increased this week I don’t think they’ve changed enough to create too much disappointment if earnings come in somewhat mixed.

What to do? Sell stocks/funds we’re concerned about into rallies, buy stocks/funds we have confidence in on pullbacks, and watch key support and resistance levels that might signal a change in direction.

The Rally Continues

We’re up over 10% from the market lows of last week. Tuesday we sold off through this year’s market lows (on most indices) and it looked like we were going to sell off from there. But the market sniffed improvements in the European debt situation, which have materialized finally, and responded to not as bad as expected domestic economic news.

After a flat to slightly down Friday we are up nearly 3% on the S&P this morning. We’re nearing the top end of our previous trading range at 1200-ish on the S&P (currently1189.) Volume on this lift hasn’t been exceptional, but the rally still feels solid and could be setting us up for a positive Q4.

6.5% Solution?

We’re up 6.5% from yesterday’s low on the S&P 500 and the Nasdaq 100, and 5% on the Dow. It sure feels good when the beating stops.

I suspect that the unofficial  ”3 Day Rule” is in effect; three up days and a pullback is sort of normal action. Therefore it might be prudent to wait for a pullback to add to key positions, although stops should be used.

The all clear has not been sounded and there is a lot of overhead resistance on most charts, so caution is warranted with all entries.

If you have a lot of cash on the sidelines you may want to add carefully on daily or intra day pullbacks.

If you’re feeling fully invested in stocks you may want to lighten up on your least favorite positions on market rallies, especially if they are lagging on up days.

Are We Broke Yet?

Technically we may be still testing this year’s lows set in early August, but the support levels of most of the major indices look more like resistance to me since yesterday’s sell off. Today’s relief rally felt good but it isn’t the all clear signal.

The next several days are important. If we can add to today’s gains and stay above, let’s say, 1120 on the S&P, 10,800 on the Dow, and 2050 on the Nasdaq100 untill earnings season kicks off we may have dodged a bullet, assuming a barely passable “fix” to Europe’s debt problems appears and earnings and outlooks are predominantly positive.

These do seem like a lot of “ifs” to me. The charts of the indices look heavy and the odds that current prices become the top of a new range seem better than 50% tonight. More soon.

Volatile, But Still Range Bound

Market volatitility has increased significantly in  August and September, but the S&P has stayed in its 1120 to 1220 range (approx.) Last week’s retest of the low end of that range was succesful. The longer this range holds the better base we will have built under the market.

As economic, financial and political news swirls around it’s important to watch what the market is really doing. Identifying major support and resistance levels helps us to keep our bearings as the media hypes the problems.

What to do? Sell marginal performers or overweighted positions into rallies. Accumulate your best positions on pullbacks. I still prefer dividend paying, large to mega cap, multi national stocks in less cyclical industries like consumer staples and beverages. Be very selective in tech, industrials, and commodity stocks. If the markets go down through the summer lows we’ll want to get more defensive.

We’re Still Standing

The S&P held 1100 this month, then bounced nicely to 1200, and then succesfully tested back to 1120. We’re currently at 1200 again, and 1250 looks like overhead resistance. This is classic base building.

I’m sensing we can continue to buy quality dividend stocks (and funds) on dips, and sell our underperformers and our momentum stocks on the rips higher. That means I think the lows can hold on good stocks and, barring any political craziness in key countries, we can enjoy normal Q4 positive seasonality.