Monday, January 4, 2010

Welcome Bulls!

The stock market got off to a roaring start today - or did it? Up 1.5% to new highs on sub-average volume? And that average has last week's anemia included.

Here is a chart I stole, er, borrowed from Tim Knight's Slope of Hope blog.

Just in case you cannot see the attributions, this is an Elliott Wave international chart created with CQG and Investors Intelligence data. The point is that there are no bears anywhere!! Sentiment is at its most bearish since before the crash of 1987!

I have long said that things are too rosy in sentiment land and while sentiment is never a trigger for buying or selling it does create conditions for things to happen. Right now, this market is running on government sponsorship. When the whiff of its removal tickles trader nostrils, I am afraid 300-point Dow down days are in our future again.

As for today's Barron's Online column, I looked at the transports again and there are plenty of crack all over the place. So are there problems in retail and multi-industry conglomerates and the banks still suck. Feel like an economic recovery to you?

6 comments:

paulocuana said...

Hi Michael, Great article and post today.
As you correctly indicate the sentiment data is very often an early indicator; a peak of bullishness in March 1987 with a price peak in August, and from my own data a peak of bearishness in November 2008 followed by this year's March low.

Are the financials good candidates to take the market lower?

Paul

William said...

BKX has been lagging the general market as well...

heywally said...

After pouring over technical ideas and index charts, I have come to the conclusion that I do not need to worry about sentiment or macro economic theories and predictions. I just observe a 30 minute chart and see how price behaves around the 100 period moving average on that. I then trade accordingly, swimming in the chop mostly, but then eventually catching the next trend break.

Quick Takes Pro said...

Paul,
I have had a short in the banks for weeks.

Quick Takes Pro said...

William,
Can't remember where but just yesterday I saw an article saying the influence the banks have on the market is way, way down.

Quick Takes Pro said...

Heywally,
Whatever works, (wo)man. The important point you made is about swimming in the chop. You understand your time frame.