Friday, October 31, 2008

Further Signs of Stock Market Strength

Money flow for the Dow 30 industrial stocks recently turned positive, adding to the evidence of buying support for the current market. Across the NYSE, NASDAQ, and ASE, Friday registered 505 new 20-day highs against 194 lows--the first time since the decline began that we've seen more new highs than lows. My measure of Demand (an index of the number of stocks closing above their volatility envelopes) was 205 on Friday; Supply was 22. That means that over nine times as many stocks displayed significant upside price momentum as downside.

Throughout the decline, periods of positive money flow have been brief and have led to renewed selling. So far, the market has been able to feed on strength. While this action isn't sufficient to rule out future price weakness, it does constitute one necessary element in a bottoming process.


Jesse W said...

the amount of fear in the markets over the last month makes me think that we are going to see a bounce. one thing is for certain, the VXO needs to moderate soon which I am sure it will

Jesse W.

Barry Ritz said...

I agree with your observation that the stock market is gaining some sanity.

However, confidence is still short and investors are still prone to mass exodus on bad news and nobody wants to hold open positions over the weekend.

heywally said...

For the next few days anyway, traders may have the 'reason' they need to take some profits off from this bounce - the election of Obama (though I don't agree that he, longer term, is a reason to sell).

It's hard to envision another push significantly higher with the uncertainty out there so the question for me will be - can 'dip buying' (with an extra level of patience and small position sizing) continue to work short term? Not sure if I will have the stomach to be shorting the election results given the short term uptrend and index levels.

Brendan Lee said...

I expect stock market to rally for the next few weeks or even months. We will also see gold, silver, oil, copper and other commodities prices going up for the next few weeks.

During this period of time many investors will think market has bottomed, and they will buy aggressively.

As this rally is mainly driven by sentiment and not fundamental, poor earnings announcement from companies will push the stock market even lower after the party is over.

One particular stock that I had already bought is AIG. I had bought it at $1.50. This is a high risk high return stock.

Fundamental of the company is in serious trouble, but I do know that the stock price will not go down to zero as US government already owns 80% of the stock.

As this is a high beta stock, it will rise much more than the general market in a rebound. I intend to take profit if the share price double or triple.