Steve-Nemer- My 2 cents worth on general trend-Why I see a trend upwards intact and a real possibility-
1- Look at DOW perpetual charts- you will see that bounce at intra day 6950 was classic pre-stability bounce with a correction of a bull market.
1-a I will invite you to Japan Nekkei Index where did it close, if you take a straight line from two tops over last few years of the trend line of Japanese market -you find the breach points at 16800 17800 and 20,800, now to confirm this move up and so will be S&P move Nekkei needs to close and brak this yoke around its neck at 16,800 once we take it out we have a reversal of a major trend in a bear market this has not happened before.
2- Soon after the bounce we see a lot of nearly four or five test to pierce through the levels of 910 on S&P the long standing support at 7200 is a mix of clear signals that we have failed to take out the support and need to move up.
3- My experience tells me when a support holds under extreme pessimism like Bovespa single day slide and Japan next morning anticipated disaster could not trigger the impending sell- off. If sell off could not come on heels of such extreme pessimism although closing below critical 910 where every one expected that 890 is next target we saw S&P rebounding to 921 next morning session, it did not stay there came back to test 900 and bounced off at 903 like a rocket - it was here our Angel Uncle told we demons (ggg) to go long, there should be no reason to expect that sellers will bee line on a non-existent immediate threat.
4- I see immediate need of break of 955- same issues apply here now on a resistance- first target is achieved that is closing above 948-49 area, another close today up there and you have a new resistance at 948-49 even the purists will yield to this explanation. Once this resistance is established at a higher level with components like INTC MSFT IBM TXN CPQ showing above levels what I consider important to pierce if this market is to move forward.
5- If 955 is taken out I see nothing btw 955 and 980, I see a test of 980 a real event along with I need earnings like AMAT DELL to provide the legitimacy of such a move as SOX and Nasdaq need to get going. The computer laden NASDAQ is on the move and I see that events and resistance levels are synchronizing nicely with a good emerging pattern, again my little experience tells me that confluence of these possibilities where 'events triggered moves' and 'critical resistance' happen to coincide we see that out come is explosive. I therefore will look at SOX above 320 if you see SOX languishing even if S&P takes out 955 on two days basis I will doubt the legitimacy of the break, I strongly advice to look at TXN INTC MSFT IBM the bell weathers you need to see a consolidation in bellwethers every thing will fall in place.
6- Look back at DOW now if we look at the basic perpetual charts- 97 earnings created what AG calls a mountain of ' irrational exuberance' this was chipped off now we are sitting at a very critical level expecting to be in historically fourth quarter earnings which are expected to be good- I have a simple rule look at Cap utilization of economy and Industrial production if price is stable below 3% we see that corporate earnings growth can be in double figures that is 11-12% now market has kind of discounted this completely and have pinned hopes on 8% going forward on that earning projection we should have DOW 10-15% lower. The question to ask is as markets are forward looking do we have good visibility of earnings which may turn this doom and gloom into some positive moves, yes I see the possibility very much. Two things to support that-
a- ASEAN and Japan is a export led region- they become more competitive- devaluation's against $ has become a feature of emerging economies- why because $ has replaced Gold as anchor- controlling money supply's led to world deficits being lowered this has helped US $ as safe haven, $ assets are prime holdings Bonds and equities as well. The deduction I have is that I concur with BCA that Current A/C deficits will rise but this will be accompanied by profits for ASEANs. I was comparing Mexican meltdown where I was long TMX proxy of Mexico within three years we are looking at a much more efficient Mexico. I think emerging Markets in ASEA has similar tendencies.
b- Europe is emerging out of slumber -one cannot ignore it, Germany is expected to grow by 3% France Steve will know better is turning around and this a major plus for US companies for example IBM INTC and all other majors had a flat performance in Europe. I also strongly believe that uncertainties around Mastricht are gradually reducing.
Under these global conditions I just don't see a deflationary or inflationary environment, I see a market which will consolidate at 945-50 level towards the end of the year before failing a test of 990-1000. Dow highs will no more then 8000 the 300 points lag is now established fact. SOX will be around 335- after failing at 345, in the interim one can establish a bullish and post 980 a cautious stance.
The down side is 890 or 6900 on the DOW, I am so focussed on emerging stability and so many opinions exist on this point from Mohan that repeating would be waste of time.
Thanks for every thing. |
