Will we break thru 1300 next week!!!
Here we go again Challenging 1300 on the S&P. If some geopolitical event doesn't spoil the party, ( Oil, Iran, Blowing up Refiners, etc etc..) the odds favor the break-out.
Seasonality is good , the Instutional Boyz are not selling much, and the last few days of February and the first week in March are usually very good days... ( See Tom's Seasonality Charts ) But we are overbought.
If we get a small pull-back on overseas Monday I might add another 10% in the I Fund. I'll be watching the Big Bull make the money in the C Fund.
The risk/reward is just to high for this conservative investor in the C and S funds right now. In my opinion the trend is still up and we could break-out, but I'll be on the sidelines.....
The question is what happens next? If the Bulls squeeze the shorts we could go to 1320, but we could get pretty thin on buyers after that. We have been stuck in this trading range for sometime now. Will this be a BLOW OFF TOP? Wish I had the answer to that. But if you have been long all year, and you have some gains to take the risk/reward, you could add some additional profits next week... I don't have the gains for the Risk/Reward and I like to buy when everyone else is selling....
The Shark talked about the Bears throwing in the towel in Friday's comments.
This could happen, and if it does we could head to 1360's, but in the mean time I'll see what happens next week... Hard to start a new leg up from overbought, but anything is possible in the Stock Market!!! It's humbled me many times that's why I'm so cautious now. I know I'm sounding like Tom...
No Offense Tom!!!
So if you play it just stay cautious!!!
Good trading/ investing for those that are long next week.
Still 20% in the I Fund... I might add another 10% on weakness...
Some Market comments listed below:
Comment 1:
Stock Market
The ball is back in the bulls' court, since -- for the second time in recent months -- the latest downside breakout failed miserably. We highlighted this information in last week's Hotline update, noting that both in late December and most recently in early February, $SPX broke below support, but failed to follow through.
Now, we are nearing the top of this year's trading range, and it appears that $SPX might be able to break out on the upside. It is time for the bulls to be similarly frustrated by a false upside breakout? The last upside breakout -- in early January -- really didn't carry very far (about 20 $SPX points) before failing. So, in general, it appears that a strategy of fading the breakouts is the best one this year.
We would expect any upside breakout to engender some follow-on buying from both short covering and from momentum traders (aided by the boost the media will provide). Whether it would be worth more than 20 $SPX points is hard to determine, though.
Such an upside move would be taking place without benefit of true oversold buy signals, and hence it is likely that it would run out of gas fairly soon -- just as the early January rally did.
Comment 2:
Friday's noncommittal trading didn't look like much, but it did serve to allow some of our intraday indicators to creep high enough to approach their overbought extremes. We're seeing more of a general lack of concern out there right now. Odd lot traders have backed off trying to short the market, typically a bad sign, and volume in the SPY and QQQQ exchange-traded funds has been absolutely anemic.
When traders are concerned about rapid market moves, they gravitate to the liquidity of those ETFs, and we're not seeing that at all. In fact, average daily volume in SPY this past week was the lowest since early October, 2004 (not counting Thanksgiving and Christmas weeks). This troubling lack of concern adds to our uneasy feeling about the equity markets in general, but are some of the only objective, quantifiable measures we can point to that justifies such a cautious stance.
We're eyeing the current close-to-overbought short-term conditions with suspicion. This is one of those times where both long and short side traders have high risk in their positions
Comment 3
The S&P 500 SPDR (SPY) now tests its January high. Even if it breaks this level, we would not be very optimistic for the long term future of the market. There is a clear defensive bias to the rally, demonstrated by the contrast between the NASDAQ 100 Trust (QQQQ) and the iShares DJ Select Dividend Index (DVY).
The NASDAQ, which is the racier, more risky part of the market is a long way below the January high, while the more defensive DVY has moved to a new high. A rotation towards more defensive stocks does not usually precede a long term uptrend.
Our position in the SPDR Mid Cap (MDY) continues in an uptrend. It has not been the best performing capitalisation group during February but it remains the best long term performer.
Comment 4
The survey of the members of the American Association of Independent Investors (AAII) revealed a sudden increase in the 8-week average before it fell low enough to produce a buy signal. Its action is more a sign of trading range indecision than it is a sign of an impending breakout.
AAII Bulls as a Percent of the Total of Bulls Plus Bears
Through Thursday, February 23rd
GO GO Birchtree!!! I hope we hit 1325 next week!!!
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