Wednesday, March 19, 2008

Some Post-Rally Market Observations

* Tracking the Rally - We swung to very positive momentum on Tuesday, with my measure of Demand at 202 and Supply at 13. This means that about 16 stocks closed above their volatility envelopes for every one that closed below. Such extreme readings usually lead to follow through on the upside on a short-term basis. New 20-day highs across the NYSE, AMEX, and NASDAQ expanded to 479; new 20 day lows dropped to 943. My Technical Strength measure showed trend shifts across many of the 40 stocks that I track across eight SPX sectors. Specifically, we're now seeing 21 stocks in uptrends, 7 neutral, and 12 in downtrends. We're now seeing 53% of SPX stocks trading above their 20-day moving averages, up from just 17% on Monday. Following relative strength and weakness among the financial issues has worked well. If this rally is for real, we should see follow-through buying in this sector.

* Themes for This Market - Abnormal Returns tracks a number of current themes, including the prospects for investment banks and hedge funds and a look at a possible unwinding of a China bubble. See also the T-bills and gold theme followed by Maoxian.

* Prospects for the Rally - Trader Mike notes the lack of follow-through in recent rallies and sees the 50 day MA as the next test for the market.

* An Options Strategy for Gold - Daily Options Report explains their gold strategy and offers an observation on the BSC affair.

* Great News Summary - Between the Hedges tracks the headlines and notes greater confidence in the credit markets.


intelligent said...

Good observations. The other day when i was on gnutrade trade forum, i found some good observations like the one which you have done. great work.. keep it up... its useful for traders like me

Michael said...

Dear Brett et all - normally im a huge fan of counting and verifying ideas before launching into a trade. But counting these days seems abit naive to me.

This is NOT normal markets and current environment does not at all seem to be the time nor place to be betting on short term historic patterns.

Just a few observations...when was the last time you saw Fed cutting rates so aggressively? and why?...when was the last time huge investment banks stocks loosing anything from 40% to 95% of their value in less than 1 week...when was the last time the banking system in generel refused to lend eachother to make things work?...what is really triggering the market these days...? tech lvls, fundamentals...or news? (most would claim a combination..and of course things are never quite as simple as one would like to put them).

And finally...if you wanna do counting...count the biggest "up" days in history and you will find they occur during bear markets.

Best of luck to all of you...from a huge fan of this site.

/Michael Hurup Andersen