An impressive turn of the market intra-day reinforces my bullish stance. Right now I'm bullish 'til S&P reaches 1000. At that point use caution. I'll look to get more defensive if (& only if) the S&P breaks & closes below 950. Don't fight the tape !

There were a number of notable rally statistics:

The Dow closed in positive territory in 9 of the past 10 sessions; the S&P rose in 8 of the past 10 sessions.

The Dow and S&P broke above their June highs.

On Thursday, the Dow closed above 9,000 for the first time since early January, and it closed at its highest level since early November '08.

The Dow Jones Transportation Average broke above its May and June highs. For those who follow the Dow Theory, that performance coupled with the breakout in the Dow produced a buy signal for the broader market.

The Nasdaq Composite Index, led by technology stocks, rose to its highest level since early October '08.

The Nasdaq advanced for 12-straight sessions. That was the longest stretch of gains for the Index since 1992. However, Microsoft’s significant sales shortfall and Amazon’s weak quarter helped stop the winning streak on Friday.

This week’s advance was led by the Materials sector, which rose 8.1%, far outpacing the other nine sectors. The Consumer Staples and Financials sectors lagged the S&P the most, rising 1.7% and 2.5%.

During a strong rally period, a good reaction is to consolidate in a sideways pattern for several days without giving back too much of the previous gain. This is what is going on today as some choppy action is absorbing some of the profit-taking that is occurring in stocks that have had big gains.

Trends are still bullish, however stocks are now more suspected to have some corrections that could begin at any time. Currently, the best opportunities are in the industrials, tech, and healthcare areas of the market, and less so in energy, financials, and retailers.

The market refuses to go down, despite the common expectation of a correction. The market is overbought on a short-term technical basis, but this is a condition that can last a long time, and it’s far from the kind of extreme readings that signal a major top. I prefer to go with the contrarian sentiment belief the majority will likely be wrong and the prevailing opinion that a coming correction may not be realized as soon as people think.

For many stocks the most opportune time to buy may be past, but there are others that appear to be emerging from their long bottoming periods, are still reasonably low in their ranges. There are stocks that can be bought for the long or short term, specifically the healthcare stocks. This sector is the timeliest of the major groups and still has many names that are technical buys that are not as far along in their recoveries as other areas.

The pharmaceutical stocks appear to be in the process of breaking out from their trading range bottoms, giving them good near-term and long-term potential.

I don't get it.  High unemployment, manufacturing base has been whored out to other countries, our finances are in shambles, our government is fundamentally changing business as we have known it and attempting to fundamentally change our country period, taxes are going up -

- this market just does not add up to me.

The Nasdaq Composite chart shows the next major resistance is around 2200, or about 10% higher than current levels. I keep a disciplined sell strategy, the higher it goes the smarter I get.

Good trading & a great weekend to all!

The DOW and S&P rose 0.9% and 0.8%, for the week. The move was led by the Financials and Industrials, which rose 4.4% and 2.7%.. The Utilities and Energy sectors lagged the S&P the most, falling 2.0% and 1.6%.

Sentiment surveys are improving. Investors Intelligence, a firm that measures the attitudes of newsletter writers, indicated there are currently 42.4% bulls and 31.3% bears.

Bullish sentiment among individual investors has risen significantly, according to the American Association of Individual Investors (AAII). The percentage of bulls rose to 47.7% this week compared to 27.9% on July 9. The percentage of bears declined to 31.4% from 54.7% during the same period.

When the percentage of bulls and bears are combined in the AAII survey—otherwise known as the Bull-Bear Spread—the rise in sentiment during July is clearly noted. Sentiment is at its highest level since May 2008.

The good news is that neither the fund flow data nor the sentiment surveys indicate an extremely high level of bulls on a historical basis. When the AAII sentiment data is viewed over a much longer time horizon, the current levels are clearly not extreme at all.

That’s welcome news since rather strong inflows and high sentiment readings can often be contrary indicators. When newsletter writers and individual investors are extremely bullish and money flows into mutual funds like water, it can often portend poor performance for the stock market. The opposite often occurs when sentiment is extremely bearish. So while the fund flow data and slightly elevated sentiment readings are something to keep an eye on, they are not a major concern at this point.

July is traditionally a neutral period & yet the markets made huge gains this month. This shows the strength of the recovery as being more than just a bounce and more likely a bull move that may have plenty of upside ahead. The indicators are mixed from both a technical and fundamental view. However, the numbers don’t lie, and the trend of the market is the overriding factor. There will be corrections and pullbacks along the way, and even drops of 10% can be considered to be normal within an overall bull trend. But for now, the trend is bullish, and the DOW target is to 11,000 over the next few months.

Stock groups have been moving in a rotational pattern. Technology, has moved up sharply from the lows, with many of the tech related indexes up over 50% from their lows. Tech as a group has major resistance, just under 10% higher than current levels, so while there is still upside potential, the opportunity is less attractive for initiating positions than it once was. The tech sector after a bit more upside, can go into a longer trading range and be more neutral for several months.

In the meantime, other market areas could pick up, with the most technically attractive being the industrials, utilities, and healthcare sectors. New investments could do better by focusing on these emerging areas rather than chasing.

Have a great weekend.

Post edited 12:33 pm – August 7, 2009 by shredmonster

PBR is not doing much right now.  I own some.

I just keep waiting for the hammer to fall – taking profits as I go along in this market.  I am holding dividend stocks as well as my TIPs and bonds and close ended funds – ZTR in my case.  Also have some nice performing International ETFs. 

Thanks to Darrell I made a nice 15% on BEXP in only a few days!  Some currencies are doing well and will continue to do well I think.

But mostly holding my breath.  I think this is a good and short read…

http://www.contrarianprofits.c…..year/19716

ZTR. I like. Looks like a reasonably safe place to put money and hopefully get a better return than a money fund.

From the above article, I'm posting a chart for those who didn't read it.

Hint: Put your cursor over the image and read the caption.

Post edited 7:06 am – August 8, 2009 by optimism

The stock market ran higher for the 4th straight week. On Monday, the major averages started off strongly as better than expected manufacturing data in the U.S and China sparked a rally & ended with a solid performance as tamer-than-expected employment data sent stocks higher on Friday. The DOW and S&P rose 2.2% and 2.3%.

The S&P closed above the 1,000 level for the first time since November. While there’s nothing special about that level from a technical perspective, it’s important from a psychological perspective. The S&P 500 ended Friday’s session at 1,010.

Earnings reports for financial services companies have shown greater improvement than the Street expected. As a result, the Financials sector has soared 136.3% since its March 6th bottom and is up 14.4% year to date.

The "recovery trade" was in full swing as portfolio managers and traders were adding exposure to cyclical stocks while trimming exposure to defensive stocks. While this has been the pattern for months, it was quite pronounced this week.

Cyclical sectors such as Industrials, Consumer Discretionary and Materials outperformed this week, rising 5.1%, 4.9%, and 4.0%. The Tech sector was the one cyclical sector that lagged the broader market after its massive run. The four most defensive sectors (Telecommunications, Consumer Staples, Health Care, and Utilities) lost ground this week.

The "recovery trade" has been occurring for months. Technology, Materials, and Consumer Discretionary are up 36.4%, 32.3%, and 23.3%, so don’t blindly chase them now. However, the Industrials sector, which is up 6.0% for the year, should have room to trade higher. Its performance got off to a slower start compared to other cyclical sectors, partly because many industrial companies typically don’t begin to post meaningful earnings and revenue growth improvement until an economic recovery has already taken hold. This is in contrast to the Tech sector, which tends to show fundamental strength earlier in the recovery cycle. The anticipated improvement in earnings and revenue growth for 2010 and 2011 may not be fully priced into the Industrial sector yet. This is one area to consider buying on dips.

Thanks Opti.  Might be time to take some profits on my FXA eh?

It appears that 1 or 2 down days can rekindle the fears of another big decline and bring back concerns about where the support levels are. On the markets way up, there was big trading with volume that occurred in the 8800-9000 area of the DOW, 940-950 on the S&P, and in the mid 1800’s on the Nasdaq. How the market deals with any further testing of the support (near term ) can provide a good clue as to the strength of the trend going forward. The higher the market finds support and turns up again, the stronger the potential rally can be. A reversal back up from higher than 9000 would be considered VERY BULLISH, while a move back to 8800 would indicate an increase in the risk to possibly break to the longer term support around 8000. The next few days will tell the story.