Wednesday, November 08, 2006

Daily summary from Fallondpicks.com

Newsletter, Members Click HereIt looked likely one was to see new closing highs for the markets, but afternoon trading kept the party balloons under wraps. There was some technical repair; on-balance-volume of the Dow was back above the bullish mid-line; the MACD of the NASDAQ looks set to bounce off support of its June-July bullish divergence; there was a MACD trigger 'buy' in the semiconductor index after a second day of solid gains - resistance at the 200-day MA awaits; the semiconductor index also gained relative to the NASDAQ 100 - a good sign for bulls. Tech market internals [$NASI, $NAA50 and $BPCOMPQ] saw a little improvement with a bullish cross of the 5-day EMA by the $BPCOMPQ. Overall, the tech market internals have not reached overbought levels typical of bull markets - so there is still (technical) room for markets to rise.

Given Democrats have control of the House, bruised Republicans can take heart the result should be good for their stock portfolios over the long term. It will be interesting to see how the market reacts to the news; will it sell the news?

Markets have been kind to bulls with a decent stretch of a rally since the bottom in June. Although I have been touting a bearish point of view to cover the next 3-4 months (I am a month into that observation and the market has turned yet!), cyclical bulls can take heart from the new 52-week highs, stalling the start a new cyclical bear sequence (within a secular bear market), only the Russell 2000 remains vulnerable to this outlook. Selling into strength is the strategy to employ, new positions in this market enviornment are a more risky proposition.

As for individual stock holds - look to trail your stop; give stocks room to move upside, but protect profits (particularly for positions taken in the June-September stretch); for some it will be breakeven at minimum, but I really like whatever low the stock made in last week's dip and place your stop 1% away from that - this should see a 20-25% profit on many positions (don't worry if its not - a new long side opportunity will present itself over the next 6-9 months).


 
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