Tuesday, January 29, 2008

Reviewing Markets Ahead of a Fed Day

* Finding Hope - We've seen ferocious rallies off the lows for two of the most beaten down sectors: homebuilders and banking issues. Both are up over 20% over just six trading sessions. The housing sector has recovered nearly all of its drop since December, suggesting that some on Wall Street may be looking beyond the anticipated continuation of weakness in 2008.

* Continued Strength - On Tuesday, we saw an expansion of fresh 20-day highs to 797. New 20-day lows remained low at 215. Momentum remains positive as well: We're now seeing 26% of $SPX stocks trading above their 50-day moving averages, up from 8% at the market lows. Shorter-term, my measure of Demand closed Tuesday at 109; Supply was 23.

* Market Ideas - Abnormal Returns offers more fine links, including the possibility of a bottom being put into place and a reflection on trading goals for the year.

* Wave Analysis - Ray Barros offers his take on the market's wave structure and his updated targets for the S&P 500 Index.

* The Business of Trading - Thanks to a reader for pointing out this interesting book review from the Alea blog. The absence of high quality training for traders, even in high-level settings, is amazing. I've yet to see a trading organization embrace the research on expertise and seek to develop traders accordingly.

* Disjointed Markets - The Quantifiable Edges blog examines what happens when the NASDAQ and Russell 2000 Indexes become disjointed.

* Trading Ideas - The Actionable Ideas blog offers trading ideas in tech and healthcare, as well as macro ideas.

* Not Such a Bargain? John Mauldin's latest offering, summarizing James Montier, finds valuations historically high among stocks, even with the latest decline.