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.
Post a Comment