Thursday, January 18, 2007

Deja Vu?

I decided to compare the current Nasdaq versus the DOW from 1929 - 1938. Looking at the two charts, it seems there is a very similar pattern developing on the NASDAQ. Take a look at the two charts below, they are almost identical.

NASDAQ 2000 - Current

DOW JONES 1929 - 1938

Holy Cow

Wow, what a difference a few days can make in the market. Over the weekend I was excited. There were plenty of quality stocks setup and ready to go. I thought, given one more week, the underlying strength of the market would match that not seen since 2005. But the last two days has brought heavy selling on heavier volume, not good. I have to move to a neutral position and become cautious on this market. This could turn out to be nothing more then a massive shakeout, which would make sense, but until we know, no need to initiate any new positions. Sell any laggards or stocks that have made very little progress. But make sure to do the research. If this turns out to be a shakeout during an options expiration week, then next week could bring good tidings. The only consolation I can find, it took quite a bit of bad news to get the market to finally have a massive down day. The kind of bad news that usually accompanies capitulation. In the meantime, no reason to be fully exposed.

Monday, January 15, 2007

Are you ready for the fireworks

I'm going to make this short as I am short on time myself these days. But I haven't seen a market that's dying to explode like this since 2005/2003. Breakouts are holding up well, and quality stock after quality stock is setting up at the gates to run. Outside of a catastrophic event, there is nothing to hold this market back. Add the fact that almost everybody is waiting for the big correction, and you have the perfect recipe for a rally. Personally I'd like to see a correction, because it will only serve to reinforce the notion that the market always bounces, similar to the late 1990's (not to the same extent), and will only serve to supercharge the rally. If the correction doesn't happen now, which I do not foresee, I believe we will see something of a correction somewhere during the year followed by what will possibly be the last leg of this bull market. Go China, Vista, private equity, lower oil and gas prices, and of course interest rates (the fed stays put, no reason to lower, the economy is regaining it's legs). I'd like to see the market stay flat this week, it will only serve to strengthen the underlying strength of the market. Don't get caught sleeping behind the wheel. If this is the big rally I believe it is, you won't get the same chance again for some years. So get your research done and don't fear the market.