some "technical" analysis from the + side:
(click on the URL to see the charts)
biz.yahoo.com
RealMoney by TheStreet.com
This Summer Will Belong to the Bull
Thursday June 17, 12:00 pm ET
By Alan Farley, Special to RealMoney.com
Let's review the market's progress over the last few weeks. Earlier this month I argued that a summer rally would begin after
triple-witching options expiration ends this Friday. My prediction was based on bullish statistics for the weeks leading into earnings
season in recent quarters.
So far the major indices have moved higher than I expected when I wrote that column. The good news is that they've taken out several
resistance levels, and then tested them successfully. On the flip side, we haven't seen the Dow, S&P 500 or Nasdaq Composite make
higher highs yet. They've been unable to reach this important milestone in unison since last December.
Technical analysts are pointing out that volume has remained weak throughout the run-up off the May lows. But my respectful response
is, "who cares?" The market isn't grinding through a phase where volume minutiae correctly forecast future direction. Instead we should
focus on the cumulative effect of the last three weeks and make sure it supports higher prices.
Weekly charts effectively turn down the chatter and get inside recent price action. And their current message is quite encouraging for
the bulls. For example, the Nasdaq 100 Trust's (AMEX:QQQ - News) weekly chart shows rising relative strength for the first time this
year. There's a good chance that other indicators will kick in soon and exhibit the upward slope that defines a healthy recovery after a
long correction.
I believe all that's needed for a rally into July is a quiet environment that encourages mild buying interest and punishes short-sellers.
Clearly both of these criteria are being met through the choppy market we've seen in recent days. And consider that help is on the way
as we head into the end of the quarter.
Seasonality is coming to the bull's rescue as trading moves into the last two weeks of June. Historically this benign period often marks
the beginning-of-the-summer rally. And the first ones into the pool should be institutions loading up in their quarter-end window-dressing
exercise.
I expect that bears will dismiss a rally into the end of the quarter as a technical exercise driven by this common activity. But the real
surprise should come next month when the rally keeps going and we see marginal new highs on the major indices. That's an easy goal
to achieve because we're already halfway there after the bounce off the May lows.
More Bullish
Now is a good time to ask yourself whether things are getting more or less bullish than they were a month ago. At this point it's obvious
that things are getting incrementally better. First, traders have already priced in a higher rate environment. Second, the terror influence
is losing its fear factor. Third, the key June 30 date for Iraq and the FOMC meeting are approaching quickly.
Most analysts think that particular day is very important to the markets, but traders know better. They're focused squarely on the time
period leading up to the date because the markets discount major events before they happen. So we should see buying and selling
activity next week based on traders' assumptions for the rest of the summer.
Students of the 1990s may recall that many rallies began just as the Fed announced rate hikes. Those booming markets illustrated the
absolute dominance of certainty over speculation when it comes to fiscal policy. In other words, a timely rate hike can put the
conjecture and worry behind traders so they can concentrate on something else.
The "something else" in this case should be the quality of second-quarter earnings. The news on that front may be outstanding because
we've seen few negative preannouncements, although we're right in the middle of confession season. I think the problem is that
everyone is so fixated on world events right now, they haven't noticed that American companies are firing on all cylinders.
I'm gathering a list of strong stocks to put some capital to work during this benevolent period. I'm looking forward to the opportunity
because this has been a dangerous year to stay invested for more than a few hours. But I don't have my blinders on and will watch
closely for anything that might disturb this bullish scenario. The short list includes Iraq, terrorism and Greenspan.
What happens as the summer winds down and we head into the fall election season? That's a real concern because of the bombing in
Madrid earlier this year. Undoubtedly the media will be fixated on the possibility of a terrorist attack in the days leading up to the
national elections. That doesn't sound like the right chemistry for higher stock prices. But it's also a scenario where the postelection
relief rally could be an absolute stunner. |
