Tuesday, October 28, 2008

Quick Update on the Scans

My breakout numbers came in at 2029, which is the highest numbers I have had this year(actually ever I believe). Now I have not gone through these scans and checked the charts, and my guess would be there still aren't many high-quality charts moving higher here, but that number is encouraging and is really what I expected to see back on October 13.

I still don't know if today means we are going to move straight up for here or even maintain a rally for more than two days - this market just remains too tough to know for sure about anything. Based on the breakout strength, I think there is a better chance of it happening now than there was back on the 13th. There are a few things to remember however. The biggest rallies always occur in bear markets - that is a fact. I think it would have been more productive in terms of a long-term rally if stocks could have moved steadily higher with four or five days of 1-3% gains on heavy volume instead of blowing their top in a one-day "super move". I think the Fed decision throws another variable into play here as well - no one knows how the market will respond. I don't know if the market even knows what it wants from the Fed. Will too big a cut be seen as another sign of how bad things are? Will too small of a cut seize things back up in the credit markets? Who really knows?

The chart below shows that although today was impressive, it in no-way is an "all-clear" sign to jump into the waters tomorrow on the long side. Basically today just took the indices back up into some levels of heavy resistance. If we can follow-through tomorrow with a heavy volume up day (and I am just talking about a 2-3% gain - I am not looking for another monster move) then perhaps things can move higher into the end of the year. That doesn't mean the bear market is over - it simply means we are long overdue for a significant bounce higher and maybe this will be the start of it. I think it is much too early to tell and I would rather wait for a little confirmation.

Dow, S&P 500
Chart from Telechart 2007, Courtesy of Worden Brothers, Inc.

I am sure you will read a lot of different opinions tonight on what today means and some very bold predictions for the rest of this week. I am not really in the prediction game - I would rather react to what does happen instead of guessing what will happen. I still think now is not yet the time to make big bets. Perhaps some of those prognosticators will be right and we will post a huge rally from here. Just remember though that the people who have been trading heavily the past few weeks are likely sitting on major losses anyway and today may just have recovered some of those losses for them. If you have been mainly sitting out, you will have the temperament and capital to make some big-time money whenever the market is ready to move for real. I think it pays to be a little patient here though to see if right now is that moment or not, rather than taking a guess and having to pay for a wrong guess in a severe manner.

I am off to a birthday dinner, so I am done for the evening. Take care and good luck tomorrow.

6 comments:

Gio said...

hi mac... that is a HUGE ino.com ad you got there. how much are they paying you for that?

ping me when you decide to get long, then I'll start increasing my position sizes.

-gio-
48thwonder@gmail.com

Mac said...

Just keep checking out the blog and that will let you know Gio. I really only see two stocks that are interesting on the long side - UTEK and ISYS. I need to see what happens tomorrow - you can't trust this market as far as you can throw it.

Good call though today on the VIX reversal and rally. I would love to see this keep going - I just have my doubts.

Gio said...

ISYS was on my buy list in September, but had to take it out. its a great company with strong fundamentals. I still like the Home Health Care niche by way of AFAM. That's the only long I'm confident about.

Its good to be cautious though, because these massive bear rallies are unfamiliar territory.

If we get a classic rally, it would probably come around mid-November after the elections.

Catch yah later.

-gio-

matt said...

Hey, great work over the past few weeks steering clear of this market aside from a few probes. Question, what IBD master newsletter are you reading?

Thanks

Anonymous said...

Hi Mac: are we going up or down from here? Thanks!

Mac said...

Matt - google "gilmo report" and you can check it out - I just subscribed to the free newsletter. I believe Gil Morales is on the site, who wrote much of the "How to Make Money in Stocks" series with the great William O'Neil.

Anonymous - I wish I knew.