A financial blog on investing in stocks, commodities and the gold bull market.
Saturday, April 25, 2009
As I said in the previous post I'm having too much fun to come home. Seriously, only an idiot would think this is fun, but I do and apparently I am. I may stay an extra day or two as the weather and climbing partners are excellent. The fact that I'm knocking off project after project is also making it difficult to head home right now :-)
Continuing on to the stock market. The first thing I want to mention is the selling on strength data has now reach -620 million. Granted this isn't always a perfect timing mechanism but this kind of selling has almost always led to an intermediate top in the past.
Add to this the fact that insiders are selling 8 times as much stock as they are buying. The current level of insider buying is the lowest in 17 years. If this was the beginning of a new bull market one would think that corp. insiders would be buying stock hand over fist.
Lowry's also is not confirming this rally. Selling pressure spiked higher on Monday's 90% down volume day. Despite the continued rally into Friday, selling pressure is not backing off and buying pressure is not picking up.
I've noted on the third chart that we now have a weekly swing high in place on the S&P. This is one of the first signs to look for at an intermediate top. That being said I wouldn't be surprised if the market were to break through 875 early next week to soak up all the buy orders sitting at that level before rolling over.
We also have a potential 1-2-3 reversal in progress. A failed move to new highs on Monday would signal a 2b reversal. Something to watch for at Mondays close
Needless to say I think any break above 875 is going to be a false break. At the moment I'm leaning towards the counter trend rally out of the March lows either being over or very close to over at this point.
It looks like the market is being held up by the dollar declining into the daily cycle low. That low is due within the next 2 to 3 days. If the dollar continues to rally out of that bottom I think we will have the top for the stock market.
Almost all the short term indicators are again overbought. That also doesn't bode well for continued strength in the days ahead.
Shorts should probably continue to hold. As a matter of fact I think shorts would probably be advised to hold till we get the next weekly cycle low later this summer or or early fall. I don't expect this to roll over quickly to new lows by any means but we probably have seen or are very close to the final top of this rally price wise anyway.
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T1. A move followed by a sideways range often precedes another move of almost equal extent in the same direction as the original move. Generally, when the second move from the sideways range has run its course, a counter move approaching the sideways range may be expected. T2. Reversal or resistance to a move is likely to be encountered: - 0n reaching levels at which in the past, the commodity has fluctuated for a considerable length of time within a narrow range - On approaching highs or lows T3. Watch for good buying or selling opportunities when trend lines are approached, especially on medium or dull volume. Be sure such a line has not been hugged or hit too frequently. T4. Watch for "crawling along" or repeated bumping of minor or major trend lines and prepare to see such trend lines broken. T5. Breaking of minor trend lines counter to the major trend gives most other important position taking signals. Positions can be taken or reversed on stop at such places. T6. Triangles of ether slope may mean either accumulation or distribution depending on other considerations although triangles are usually broken on the flat side. T7. Watch for volume climax, especially after a long move. T8. Don't count on gaps being closed unless you can distinguish between breakaway gaps, normal gaps and exhaustion gaps. T9. During a move, take or increase positions in the direction of the move at the market the morning following any one-day reversal, however slight the reversal may be, especially if volume declines on the reversal.
General Trading rules
G1. Beware of acting immediately on a widespread public opinion. Even if correct, it will usually delay the move. G2. From a period of dullness and inactivity, watch for and prepare to follow a move in the direction in which volume increases. G3. Limit losses and ride profits, irrespective of all other rules. G4. Light commitments are advisable when market position is not certain. Clearly defined moves are signaled frequently enough to make life interesting and concentration on these moves will prevent unprofitable whip-sawing. G5. Seldom take a position in the direction of an immediately preceding three-day move. Wait for a one-day reversal. G6. Judicious use of stop orders is a valuable aid to profitable trading. Stops may be used to protect profits, to limit losses, and from certain formations such as triangular foci to take positions. Stop orders are apt to be more valuable and less treacherous if used in proper relation the the chart formation. G7. In a market in which upswings are likely to equal or exceed downswings, heavier position should be taken for the upswings for percentage reasons - a decline from 50 to 25 will net only 50% profit, whereas an advance from 25 to 50 will net 100% G8. In taking a position, price orders are allowable. In closing a position, use market orders." G9. Buy strong-acting, strong-background commodities and sell weak ones, subject to all other rules. G10. Moves in which rails lead or participate strongly are usually more worth following than moves in which rails lag. G11. A study of the capitalization of a company, the degree of activity of an issue, and whether an issue is a lethargic truck horse or a spirited race horse is fully as important as a study of statistical reports.
Investing in the financial markets can involve considerable risk. Past performance is not necessarily an indication of future performance. The information included in The Smart Money Tracker and The SMT subscribers daily updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system. Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. G.D.S L.L.C., nor Gary Savage, do not represent themselves as acting in the position of an investment adviser or investment manager for funds that are not under their direct control and fiduciary responsibility. GDS L.L.C., Gary Savage, will not provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter. From time to time, GDS L.L.C., Gary Savage, may hold positions in securities mentioned, but are under no obligation to hold such positions.