Market Update

An interesting news item crossed this afternoon.  US markets have seen outflows for 8 straight months and December is working on being the largest since July 2002.  I looked back at that market and a similar scenario occurred with the indexes in July of 2002. 

 

The market bottomed July 2002, followed through, and then in 4 days almost gave back everything from the first day of the rally.  But, the sell off failed to undercut the previous low keeping the rally alive.  The market did muster a one month rally after that point before rolling over (of course this does not consider where the market was coming from or going, only that similar news was present).  This scenario would continue to play into my belief that this market could still produce a very nice, trade able, and profitable rally.

 

If you've chosen to sit out in cash or went to cash in this rally, I would not fault you one bit.  But if you can handle the volatility, then holding some positions through this sell off would not be condemned either.  Of course if we do undercut the lows, the prudent course of action would be to move to cash unless you have a stock that is acting exceptionally well.  If we do rollover here to test the November lows, I would still believe that a climactic type rally would still be in the cards early in the year unless the big cap stocks suffered severe damage.

 

Have a nice holiday and merry new year!!
 

 

FT Days & Market Review

Here's my take on follow through days from my many many years with them. 

 

It is true that 70 - 80% of the time they are tradeable.  When they fail, they do so quickly, and usually because they lack power from leaders.  A good example was 8/6/07 and 6/30/06.  In both cases you would have been presented with almost nothing to buy at or after the FT day.  So just merely sticking to quality stocks would have kept you from committing alot of money.  That's why if I see the FT and tons of breakouts follow, I don't fear loading the boat since most of the big mooses do come out early and I want to be on the train.  If the breakouts don't follow, then I am very quick to sell any laggards right away, and leaders right after.

 

This is not a fat pitch market.  Without my experience I would not want to be involved here either with the insane volatility.  But, I know what I'm up against and how much I am exposed for, so I don't fear it.  Trust thyself.

 

It is touch and go here, but so far the leaders have not come under major distribution.  They have reacted accordingly to a volatile market, but have lacked volume to the downside.  Which makes me believe this rally may have some more legs to it.  There are quality stocks that are completing their 7th week of a base, pulling back to pivots, and other that need a little more time.  If what we've seen is only a shakeout, then the shakeout may have served its intended purpose and could give longer life to the rally.

 

I did sell all my laggards going into the FED, but there was no where to hide on Tuesday.  If you're in a winner, you

Correction Stats - Last 3 Corrections

I would fully expect the market to bounce early next week after the bloodbath this week.  The closer we get to Thanksgiving, the more likely the market will rally.  If we don't get another hard leg down before Thanksgiving, I would expect it to happen a week or two after.  That should setup the next leg up, if there is another one this year.

 

Enjoy The Weekend!!!

 

11/9/2007	Correction						Correction Levels
Index	52 WKH	Start	Length	Low	%		10%	15%	20%	25%	30%
Dow Jones Industrial Average	14,198.10	10/11/07	4.40	13,017.30	-8.32%		12,778.29	12,068.39	11,358.48	10,648.58	9,938.67
Nasdaq Composite Index	2,861.51	10/31/07	1.60	2,624.43	-8.29%		2,575.36	2,432.28	2,289.21	2,146.13	2,003.06
NYSE Composite Index	10,387.17	10/11/07	4.40	9,691.46	-6.70%		9,348.45	8,829.09	8,309.74	7,790.38	7,271.02
Russell 2000 Stock Index	856.48	10/11/07	4.40	762.38	-10.99%		770.83	728.01	685.18	642.36	599.54
S&P 400 Midcap Index	926.67	10/11/07	4.40	856.68	-7.55%		834.00	787.67	741.34	695.00	648.67
S&P 500 Index	1,576.09	10/11/07	4.40	1,448.51	-8.09%		1,418.48	1,339.68	1,260.87	1,182.07	1,103.26
S&P SmallCap 600 Index	445.82	10/11/07	4.40	395.80	-11.22%		401.24	378.95	356.66	334.37	312.07
8/29/2007	Correction						Correction Levels
Index	52 WKH	Start	Length	Low	%		10%	15%	20%	25%	30%
Dow Jones Industrial Average	14,021.95	07/17/07	6.40	12,517.94	-10.73%		12,619.76	11,918.66	11,217.56	10,516.46	9,815.37
Nasdaq Composite Index	2,724.74	07/19/07	6.00	2,386.69	-12.41%		2,452.27	2,316.03	2,179.79	2,043.56	1,907.32
NYSE Composite Index	10,238.25	07/13/07	6.80	8,811.55	-13.93%		9,214.43	8,702.51	8,190.60	7,678.69	7,166.78
Russell 2000 Stock Index	856.48	07/13/07	6.80	736.00	-14.07%		770.83	728.01	685.18	642.36	599.54
S&P 400 Midcap Index	926.67	07/13/07	6.80	797.27	-13.96%		834.00	787.67	741.34	695.00	648.67
S&P 500 Index	1,555.90	07/16/07	6.60	1,370.60	-11.91%		1,400.31	1,322.52	1,244.72	1,166.93	1,089.13
S&P SmallCap 600 Index	445.82	07/17/07	6.40	387.48	-13.09%		401.24	378.95	356.66	334.37	312.07
3/21/2007	Correction						Correction Levels
Index	52 WKH	Start	Length	Low	%		10%	15%	20%	25%	30%
Dow Jones Industrial Average	12,795.93	02/20/07	4.40	11,939.61	-6.69%		11,516.34	10,876.54	10,236.74	9,596.95	8,957.15
Nasdaq Composite Index	2,531.42	02/22/07	4.00	2,331.57	-7.89%		2,278.28	2,151.71	2,025.14	1,898.57	1,771.99
NYSE Composite Index	9,463.62	02/26/07	3.60	8,812.37	-6.88%		8,517.26	8,044.08	7,570.90	7,097.72	6,624.53
Russell 2000 Stock Index	830.01	02/22/07	4.00	760.12	-8.42%		747.01	705.51	664.01	622.51	581.01
S&P 400 Midcap Index	870.89	02/26/07	3.60	809.02	-7.10%		783.80	740.26	696.71	653.17	609.62
S&P 500 Index	1,461.57	02/22/07	4.00	1,363.98	-6.68%		1,315.41	1,242.33	1,169.26	1,096.18	1,023.10
S&P SmallCap 600 Index	423.35	02/22/07	4.00	389.75	-7.94%		381.02	359.85	338.68	317.51	296.35

 

 

Current Correction Market Stats

You wouldn't know it by the NASDAQ, but we're in the 4Th week of a correction on every other index.  The small caps are almost down -10% and all the other indexes, except the NASDAQ, are down 6%+.  One by one they have been hitting the leaders.  There is now just a handful that have not succumb to the selling.  The damage though is minimal on the large cap tech leaders.  Which plays into my theory that this is another correction (another nasty one, Feb/Mar, Aug/July, and now) on the way to the ultimate climax run to NASDAQ 3000 and China Olympics.

 

If I had to theorize on what is happening right now, I would say the market is selling off in anticipation of really bad investment bank earnings(they may be surprised or they may finally throw the baby out with the bathwater) and a FED(DEC 12Th) that will hold pat on rates in early December.  Once that news is out of the market's system, we could get the next leg up and refocus on the large cap technology leaders.  The market may even start moving higher before that as it has ahead of other major news events this year.  In either case, the market will potentially present better buying opportunities over the next few weeks.  For now, I would hold off from committing new money to the long side until we can rally in the face of bad news.

 

This will be fun to watch.

 

 

11/7/2007	Correction						Correction Levels
Index	52 WKH	Start	Length	Low	%		10%	15%	20%	25%	30%
Dow Jones Industrial Average	14,198.10	10/11/07	4.00	13,285.63	-6.43%		12,778.29	12,068.39	11,358.48	10,648.58	9,938.67
NASDAQ Composite Index	2,861.51	10/31/07	1.20	2,748.31	-3.96%		2,575.36	2,432.28	2,289.21	2,146.13	2,003.06
NYSE Composite Index	10,387.17	10/11/07	4.00	9,824.20	-5.42%		9,348.45	8,829.09	8,309.74	7,790.38	7,271.02
Russell 2000 Stock Index	856.48	10/11/07	4.00	775.37	-9.47%		770.83	728.01	685.18	642.36	599.54
S&P 400 Mid-cap Index	926.67	10/11/07	4.00	869.66	-6.15%		834.00	787.67	741.34	695.00	648.67
S&P 500 Index	1,576.09	10/11/07	4.00	1,475.04	-6.41%		1,418.48	1,339.68	1,260.87	1,182.07	1,103.26
S&P Small-Cap 600 Index	445.82	10/11/07	4.00	401.55	-9.93%		401.24	378.95	356.66	334.37	312.07