Thursday, January 24, 2008

Bears and Bulls: Perspectives for Thursday

* Is it a Bear Market? - Above we see a perspective from 2000 to the present re: the percentage of S&P 500 stocks trading above their 200-day moving averages. (Mad props to Decision Point for the chart). When we were in bull mode, corrections stopped when we had only about 40% of stocks trading above that benchmark. In bear mode, we have dropped below 20%, similar to levels seen during the 2001-2002 period.

* Indicator Update
- A ferocious rally on Wednesday followed a successful test of Tuesday's lows, with buying once again very strong in the sectors that had been most oversold: banks and homebuilders. We saw 502 stocks make fresh 20-day highs across the NYSE, ASE, and NASDAQ; new lows were 2154. Demand was a very strong 137; Supply was only 16. This means that the number of stocks finishing the day with strong upside momentum outnumbered those with strong downside momentum by over 8:1. When we see such surges in bullish short-term momentum, there is usually follow through to the upside the next trading session, and that's what we're seeing so far in pre-opening trade.

* What's Strong - Technical Strength also improved on the heels of Wednesday's rally. We now have 8 of the 40 stocks in my basket showing bullish trending strength: DD, UPS, HD, WMT, WAG, WFC, JPM, and IBM. Interesting to see two banking names on the rather diverse list.

* Bottom Pattern? - Trader Mike posts a couple of interesting patterns in the wake of yesterday's market and finds a 2004 analogue. See also Declan Fallond's look at patterns, especially in the semiconductors.

* Bail Out - A Dash of Insight finds a dash of bullishness in the news of a bond insurer bailout and examines a bullish market pattern.

* Selling Short - Chris Perruna offers perspectives on when to go after longer-term short positions.

* Views on the Bear - How this market is like 1987 and what the most successful market timers are thinking are among the latest links from The Kirk Report.

* Review of a Volatile Day - WSJ MarketBeat examines the dynamics of the recent market and why bonds may not be a good place for long-term investment at these levels.

* Favorite American Idol Tryout So Far - Thought I was watching my daughter. Whatevs.