Here I return from a frustrating day developing software expecting to find the usual interesting group of people here on the Stock Attack thread. Now I find myself pleasantly surprised to see that Judy decided to drop in. Very good to see you here, Judy. Please feel free to drop in at any time.
It looks like I better get myself together here before the market blossoms into a new bull run. I have access to another PC now, so I will be able to reload my TA software and quote data so I can develop a more intelligent analysis of the market and specific stocks. I feel "half blind" without it. My software project has been helping to take my focus of the markets too. For the time being, I will post some comments I have to make on what I have been able to see about the market from my limited view on the sidelines. Please do not hesitate to provide me with your comments and feedback on what I have to say here.
I see some good evidence that the market may be ready to move out of its trading range. There has been evidence of institutional participatiopn in the stock market since they had to find a place for a recent large inflow of money. From what I understand, this showed up in the box stocks. It is interesting to see that there was allot of CALL option activity around the same time. I think this option activity actually preceded the positioning of institutional money by at least a day. Anyone one to confirm or invalidate this?
There has been successive days of money moving from the bond market where large money has been sitting it out back into the stock market. Investors apparently have been moving into the "blue chip" variety of stocks like GE, DISNEY, and Merk, and the larger tech leaders like MSFT, DELL, CSCO, and even SUNW. The NASDAQ has been narrowing the gap between it and the Dow in recent history. There has been a recent breakout by the NASDAQ Composite which was lead by the NASDAQ 100. The current market leadership has been coming from the large cap techs. The S&P 500 also has hit a new high.
Market sentiment has been definitely improving. There has been evidence of pent up buying interest but no direction to the market due to fears of the Asian problems, its impact on corporate earnings, and also any deflationary pressures that may come out of this. Investors are not conerned about inflation, and their Asian worries have been apparently put to rest with the results of this earnings season and some help from Greenspan. The holdup was that that pending news would break on the earnings and deflationary fronts that would validate the market's fears which never did. Earnings reports apparently did show a slowup in earnings but were not as bad as many thought it would be. I think there will be a focus on companies that can continue to report reliable earnings. Commodities were starting to drop however it appears that this has not turned into the deflationary evidence that many were looking for.
Stock market action during the recent earnings season appeared on the surface to be unpredictable. However, I think there were two issues in operation here. One was that the stocks had to a measurable extent already discounted the negative earnings warnings that came out earlier. Perhaps what the market was playing off of is the leading comments that came out of the conference calls about the company's future earnings. Also, there apparently were allot of exhuberant speculators out there interesting in making the quick dollar on earnings plays. So there was allot of scalping of stock, and covering of negative bets made before earnings reports. This helped make for a volitile market. Fear and greed certainly can make for a volitile market. I think there was evidence of both by the traders in this market recently. I think may players in the marke did not see the bull market coming to an end. They questions to them was not "if" but "when" a new bull run in the market would happen.
Now that the earnings season is moving past us, the fear of the unknown is being replaced by anticipation of a market uptrend which should encourage more players out into the market. Also since the market had bottomed earlier and now is showing strength, it may be not long for the institutional money to help the market to new highs. They have been sitting on allot of cash up until now. I do not think there can be a sustainable rally without the institutional investor's participation. Perhaps this type of investor will wait until the first successful breakout and retrace to confirm market support before they start to move into the market agressively. But I am not surprised tthey started to move money into the market as soon as a bottom was in evidence because since they are dealing with so much money, they need to be more bottom fishers that momentum type of players. They are not interested in having their money work against their efforts in procuring good prices. So it is better to start purcahsing stock when there are still a selling interest which could provide them with the larger blocks of shares that they are interested in. Any comments about this, Judy?
I want to alter everyone that it will be prudent to remain cautous about this market until the Dow has hit and sustained new highs. It may be also wise for those that are not risk tolerant to wait for the pullback after the initial run up for key support to be validated. Then we can see what will happen. By then, the leadership in the market will have sorted itself out. At least at this point it appears the techs are still in the driver's seat. But I suspect there will be continued increasing participation in the mid caps and down the line with a more exhuberant market more speculation in the smaller cap stocks. I also think there will not be the broad participation of the tech group in the next market rally. This will provide for a more selective situation for the participant in this market.
So this is the best that I can do under the circumstances. I should be back into my old market routine soon. Not bad for managing this computer of mine without a mouse! This indeed has been a little adventure for me.
Any comments or feedback? Judy?
Bob Graham |
