Wednesday, May 18, 2005

Market Letter

Officially all the major market indexes are now in confirmed rallies.Today we finally got another powerful day in the market confirmed byvolume. I know I was cautious the other day, but the first rule inthe market is to always protect your capital. At this point I'm evenmore convinced that my original call was correct that we have seen abottom and the market will continue to move higher. If you haven'tparticipated in this rally to this point, I would recommend you begin.By the time things become obvious that is usually the end of the move.

I found something very interesting while doing my research the lasttwo days. Retail and hotel/motel REITs, retailers, and other consumercompanies are either at or near 52 weeks highs. If the economy isdoing so poorly why are these stocks moving higher. Is it possiblethat the market is signaling better times ahead as it usually does?I'd say yes. As long as there is a Republican President the mediawill continue to try and convince you that the economy is heading intorecession. But the market knows better.

Don't let your opinions keep you on the sidelines. If this marketweakens for some reason, I'll let you know. For now, do your researchand get involved. But don't take my word for it, just look at theprice volume action of the market, especially the NASDAQ, which isleading index at this point.

Remember, always protect your capital first.

Tuesday, May 17, 2005

Market Letter

On the surface, today looked like a strong day, but digging deeperthe market continued its pattern of sell offs on high volume andrallies on low volume. Today was no different. The major averageshad huge gains but volume was no where to be found. At this point Iwould be reducing your exposure to the long side especially ifyou're on margin. It looks like the market may need another downleg before moving higher, particularly the DOW and S&P. If youremember I got extremely bullish when the NASDAQ undercut 1900 andrallied strongly, but I was cautious about the fact that I would'veliked to see the DOW undercut 10,000. It now looks like it mayhappen. If not, then I will resume increasing my exposure on thelong side. For now though, no need to take any chances with thecurrent price volume action of the major indexes. Tomorrow is thePPI report; let's see how the market acts.

I've heard a lot about buying homebuilders for the long term orinvesting in real estate in hot markets. If you're one those peopleI would strongly reconsider. The homebuilders are looking extremelyweak on their charts and look like they are topping. Talk to anyreal estate professional who's willing to give you a true assessmentof the market, and they will tell you that things aren't looking asgreat as things seem. Prices are getting away from most people'scomfort and affordability range. Most of the buying is being doneby investors and by homeowners who already own 2+ properties. Takeinto account that on every market news channel you have oneanalyst/real estate professional after another telling you this timeit's different and we are in a paradigm shift, and shivers shouldstart to creep down your neck. Think back to the stock market in1999 and 2000, they were saying the same thing about stocks. Therest eventually was history as we all know.

Learn from history, it repeats itself, more then you think.

Wednesday, May 04, 2005

Market Outlook

The market gave us a powerful confirmation day on all the indexes. Ifyou're not long yet or haven't looked for setups I suggest you start.If anything changes I will let you know.

Sunday, May 01, 2005

Market Letter

My belief is that the market marked a bottom on Friday. Barring anyunforeseen events, we should move higher from here. Here are someof the reasons:

1. Sentiment has been highly bearish over the last several weeks.
2. The NASDAQ under cut 1900 and traders began to panic.
3. Oil is under $50 a barrel and prob has topped, again barring anyunforeseen turmoil in the Middle East.
4. Top rated stocks with high growth have begun to breakout out ofbases and hold their breakout points. Other stocks are close tofinishing up their bases.
5.The reversal on Friday came on heavy volume.
6. Earnings are coming in well above expectations and guidance hasbeen good.
7. Softer economic data recently may be signaling that the Fed hasdone their job and interest rates maybe close to topping in the nextmonth or two.

The market may be seeing better times on the horizon. Remember,recent bad news is already built in and the market moves on futureexpectations ( 6 - 8 months outward). Typically, things look theworst at the bottom and the best at the top.

We may still go lower but not by much. I would have preferred theDOW to undercut 10K on Friday to really set off even more panic.

To get a firm confirmation that this rally will hold, we will need astrong up day sometime after Tuesday of next week on heavier volumethen the previous day and no more high volume sell off days.

This leg up won't be the best one, but it is a start. Once morestocks setup and breakout, the market will then have the ammo toreally make a move.

Nothing is 100%. Cut your losses short, and if the market starts toget distributed next week, get off margin as we may actually need tosee the DOW under 10K before we could go higher.