Monday, November 29, 2004

Market Letter

The market has paused since the 17th. Can we say dollar? Yes, thedollars depreciation has almost taken over for oil as a potentialmarket drag. But all bull markets like to climb a wall of worry, sothis is the new worry of the day. Don't worry; oil is still in theback of most people's mind.

All bull markets pause to consolidate and shake off the froth. Thisweek brings alot of big economic reports. GDP, oil inventories, andpayroll numbers. Any of these numbers can jolt the market one wayor another. If you've noticed the action in the market, you've seenthe market gap up and come in almost regularly on these reports,similar action to the bull run of last year. This type of actiontends to suppress the speculation in the market, and allow it tomove in a steady fashion. But, speculation can't be held backforever, and once it is unleashed, that final run is usually a signof a top to come. My point is, in a gap up opening, be careful ininitiating long positions that day, as they might quickly reverse onyou. Best times to buy, is a flat opening, or a down opening and areversal into positive territory.

Keep looking for breakouts as leading stocks continue to consolidatewell, as the market takes a breather. If my assumptions arecorrect, the market should continue to move higher through the firstquarter of next year. But keep an eye on it, conditions can changein as little as one week.

Wednesday, November 24, 2004

Market Update

Market continues to act well. We are in for abreather at some point, and Friday may have started it. But by the way the market reversed today it looks like it just wants to continue higher. I'm not one to argue with the market as long you have strict risk and profit management rules in place. Several mergers and big dividends are about to close and get distributed. This will add alot of liquidity to drive the markethigher. On top of the economy reaccelarating, andchristmas just around the corner, it looks like itwill be a merry christmas and a happy new year for themarkets. Leading stocks, continue to lead. Even asthe market has had some bouts with distribution days,they have held up nicely, and have corrected modestly.Earlier this year, the exact opposite occured,leading stocks came crashing back into bases as themarket got sold off. Hold onto your winners as longas they are not showing sign of weakness, and look fornew buys that maybe setting up for the next leg up.Oil could still pose a short term problem, but as soonas it stabilizes the market just discounts it andmoves higher. The rally that started in late Augustis still intact. We got rally confirmation days onall the indexes, even though the DOW needed to do ittwice since it undercut it's August rally low, on theSpitzer affect. Volume has been running much heavier on up daysthan down days. Look back at MArch 2003 and you will see alot ofsimilarities between the two markets. Earlier this year, everyrally was followed by heavy selling in the indexes. The advancedecline has also been trending higher since August. The 20 and 50DMA have crossed overon both the NASDAQ and S&P, and we're just waiting onthe DOW. The S&P has been the leader so far thisyear, but that may change as the NASDAQ ramps up. Nomatter which index leads, just look for the leadingstocks. If you haven't particiapted up to now, there are stillopportunities out there, you just need to look for them.