Thursday, February 17, 2011

Market Roars Back.....

But you just can't kill the beast someone once wrote in a song. No
different here, as the beast known as the bull market, won't go away
quietly. It gets a drop below overbought, then comes raging back
without even a fight by the bears. It's as if they've just given up,
which makes me nervous. But you can't argue with a market that uses
any promotion to come right back the very next day. The futures
started ticking up overnight, which told me here we go again. You just
can't keep this thing down with any momentum. You marvel who's buying
these futures. The fed? Could be, but it doesn't matter does it. It
catches on with many others joining in and up she goes. We gapped up
and spent modest time churning before moving higher still. There was
one powerful pullback intraday, but that, too, got bought up as they
rolled along.

That allowed the market to close very close to the highs of the day,
and also allowed the Nasdaq to close above price resistance at 2817.
Not a blow out above, thus, it's not really safe, but above price
resistance, nonetheless. Once it disastrous intraday you would have
thought that it, but not this crazy bull market. Shocking how promptly
that pullback was bought up. Shows you the power of what's waiting in
the system on any promotion. It takes about one percent before the
orders start roaring in. Bottom line is the market closed nicely, and
above 2817 Nasdaq, which opens the door to trying to get up to the
2007 highs at 2861. Time will tell if that's possible but it's only
one and a half percent away.

One has to marvel the affect of all of this easing by the fed, and all
of the dollars being printed with regards to the value of our dollar.
The chart of the dollar is collapsing, and ultimately, that can't be
excellent for the citizens of this country, but the fed, the printing
press fed, seems unconcerned about that for now. He has to know, one
would reckon about the ramifications of all the printing, but he truly
doesn't seem to care about the future. It seems as though he's focused
only in the moment and will try to deal with the fallout when it hits
years from now when everything is really devalued.

In a perfect appropriate world, the dollar would rise along with
stocks, but the inverse relationship is holding up overall. Some days
they trade in tandem, but overall, they trade inversely and sadly. In
the case of the printing press, it means terrible things for the
United States dollar. To sum it up, we celebrate a excellent market
today, but we will pay dearly for this behavior in the years to come.
No one knows when, but it will hit us all when we least expect it.

The market has been grinding its way higher for months. You get a go
up, and then you get a handle, or bull flag, that ultimately rises
once again. Until this market shows that this sample won't work, it's
best to stay with the patterns perceived future based on the recent
past. You really need to avoid shorting a market such as this, and I
bring this up tonight, because it's vital to stay with the trend and
not fight it as some of you are now thought of doing based on emails I
have received. At some point shorting will work. Maybe that moment is
upon us, but those of you who wanted to start shorting a month or more
ago, must be glad you didn't small just because we were overbought. It
would have been very painful for sure. Just stick with the trend, and
accept that at the end of the go. You'll have a loser, or two, but it
won't be too terrible because we'll exit promptly on the huge reversal
stick. No way can anyone hit 100%, so be prepared for a tiny hit by
being long a bit when we reverse down. No worries. We'll deal with
that later, but for now, stay away from vacant against the trend as
much as humanly possible.

RSI's are at 75 on the Dow, 72 on the S&P 500, and just shy of 70 on
the Nasdaq.
Basically, they're just above 70 on all the other major index charts.
We all know that markets stay overbought far longer than they do
oversold. It's been that way forever, and isn't likely to change any
time soon. Because we can stay overbought much longer than anyone
would expect, it's telltale us to stay long, but it's also telltale us
that when taking on new plays, make sure the chart of that individual
play is not overbought as well.

Try to buy plays that have unwound stochastic's below 50, if not near,
oversold at 20.
Get RSI's that are decently below 70. 55, or lower, would be even
better. In a different environment you wouldn't have to be so careful,
but you really do need to be careful right now. It's a game of
appropriateness at all times. Slow and simple here at overbought.


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