cell, actually, I think that before the end of the year we may make new highs on SSTI (not SNDK, nor most of the semi equip), INTC, and even AMD.
Here is how I view the next four months. NAZ range, max downside risk, around 3500/3550, possible top at around 5200 (a marginal new high). DOW, a possible dip to 10750 (max risk right now) and a possible top at a new high of around 12250. By the way, this is well in line with my April "forecast". The actual low was on May 23rd (a miss of 5 days, since I had May 18th as the low).
Most of my indicators are in pretty good shape, and we have, so far have managed (with a minute relapse) to get the stealth rally we discussed two months ago. I expect the rally to continue in its "stealth" ways until about labor day, by then we should be above 4270 on the Naz, and the rally will become "visible" to all. Some of the indicators that are showing very good strength are the NYSE index breaking to a new all time high and the strength of the utilities. Others are the lack of extreme optimism as indicated by the tick never getting above +800. A/D on the NYSE is recouping, and while lagging in the Naz, it just gives us more room before we get over extended. The same with new highs new lows, not yet at levels reached before the March debacle, but improving steadily. One would be inclined to note a divergence between these and the relatively low volume on the NYSE breakout as well as the fact that the VIX is under 20 as this milestone was breached. However, last NOV/DEC, the VIX was under 20 as well and the NAZ went in a single swoon from under 3000 to 5000 plus, more than 66% in barely four months. I do not expect that much of a run here (only about 1200/1300 Naz points from a higher base). I think that the VIX is a good indicator, but only at extreme and only in conjunction with other indicators. Since I expect the next top to signal the beginning of a murderous bear market, greater extremes in sentiment indicators and valuations will need to be reached before that top is in.
While we may hear a lot about the market's reaction to daily polls results from the electioneering, I think that apart of weakness in oils and drugs when the DEMS are on top and strength in these when the GOP show better chances, the rally I expect should be broad based. The only sector I would avoid are the various internet companies. Many of these are already on their death bed. The rest of the technology sector should do well, with a number of semi's (not semi equip) making new highs.
Some of the drivers are going to be, liquidity (from Summers, acquisitions and pension money), good earnings starting in October (we should see the first salvo with MU reporting before the rest of the gang, and with DRAM's fuming, I expect a very good report there, marking a new all time high in MU and an opportunity to bail out for whomever is in it).
I expect the high to be reached within two weeks of the election (post), then a sharp decline into the first few weeks in December with an attempt to rematch the November highs in late December early January. Right now, I am planning to be out of the market before the end of January since I believe that February will be a disaster.
Of course, the turnips reserve the right to be wrong, change their mind and change it often (g).
Zeev |
