Tuesday, December 18, 2007

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!!


Wednesday, December 12, 2007

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