Wave. Jake Bernstein sees bear market rally into early June
investavenue.com
<Following a persistent decline for over 8 weeks, stock prices surged higher on
Wednesday, scoring some of the largest one-day gains in many days. S&P 500 and
Nasdaq futures surged as buyers rushed into technology stocks prompted by positive
results and comments from Cisco (CSCO). The rally surprised many traders with its
ferocity and persistence. Yet, those who have been reading my daily comments here
with regard to the very low level of Daily Sentiment should not have been surprised by
the rally. I remind you of the 2 primary factors now hard at work in the equity markets.
They are as follows:
• Seasonal factors and forces point to a rally until early June. The historical odds of
such a rally are high
• Market sentiment as assessed by the Daily Sentiment Index remains low, suggesting
that the smaller investor is still pessimistic.
These two powerful market forces combined to produce the explosive rally (as
predicted here) in equities on Wednesday. However, the KEY QUESTIONS now are:
• Is the rally merely a bear market recovery, long overdue?
• If the rally is like to continue then how high could the major stock indices go? And,
• How long can the rally last.
Here are my replies:
1. The odds favor a continued rally until early June at which time seasonals tend to
peak for a while
2. Resistance at or near the April highs is the first target, and
3. Because the approximate 4 year cycle in stocks is still bearish until October 2002, the
odds will favor a decline AFTER the traditional "summer rally"; a decline that could still
test the September lows or , in fact, penetrate them.
This is why I maintain my intermediate and long term bullish stance on gold. As
reported to you in my last report, gold was expected to decline for the short term and it
has. The reversal down on Wednesday 8 May 2002 was a particularly negative
indication technically, and the highs of this move could now pose substantial
resistance.>
One of the few I've found who has a read similar to mine.
BTW, I like SWC also. Hoping for a trip to 15-16 area, so I can add. Been holding a moderate sized position against which I've written puts and calls. My thinkings was that, after the big drop some time ago, we'd remain in a trading for some time. Writing straddles at the boundaries of what I thought that range was would significantly increase my rate of return AND significantly lower my risk until the basing period was over. So far, that's what has happened. So I'm a happy camper.
This will be my last post today. Sinus' are miserable. Gonna go read and hit the hay.
Best regards,
Isopatch |
