Good Morning,
What a FAKEOUT! Yesterday's pre-market jitters, as well as the entire week's pattern of trading was nothing more than the markets attempt to "shake the loose fruit off the tree." This is the exact reason why I waited until the close on Friday to pass judgement on this bull market. Although the damage during the week gave the appearance that we were beginning to roll-over. Its the close on Friday that matters most. Weekly closing prices cut through the noise of very volatile trading periods. A good example this week was AOL. This week AOL finally broke out of its consolidation pattern, only to get killed with the rest of the market. As a technician you hate to see a stock attempt to breakout only to close at lower prices (weekly close). The stock rallied yesterday to close unchanged from last week. The Dow which lost 302 points this week closed at 9340. The previous closing high for this index on a WEEKLY basis was 9337. So this weeks action and damage that was done, in the context of the overall trend, was just a brief stop along the way to higher prices. Of course we need to look at as many pieces of the puzzle as possible in predicting market direction. Thats why threads like this are so valuable. As an individual I can only cover so much of the markets. But as a group, we are able to take things to a much higher level. There were many great calls this week. Congrats to all. So when looking at the bigger picture, here's what I see:
Despite the Brazilian scare, the big money center banks like JPM and CMB recovered nicely on Friday. Their charts look explosive. This is the one sector most affected by devaluation. A serious move in these stocks will only light a fire for the other sectors.
The Airlines look like there ready to take off. DEL, AMR, UAL and U should all help to push the Transports higher.
Some of the pervious market leaders have already started to move or are in the process of breaking out again. Companies like GE, CSCO, DELL, INTC, IBM, GM, JNJ and MRK.
I do not believe the move in the internets is over yet. Despite the weakness in YHOO, many of these stocks are holding up very well. As a matter of fact, AOL closing where it did tells me there is probably much more upside to go. Look at those 2nd tier internets that I keep pointing out. ONSL was up almost nine dollars on Friday on huge volume. It looks like it getting ready to make a big move this coming week. Or how about CYSP, one of the few internet related stocks that I pointed out that hasn't moved yet. At $11.0 this could double very quickly over the next couple of weeks.
Small stocks continue to power ahead. ACEC, RACE, INSGY, ANCR, OMTL are flying. These stocks are not represented by an index but its the strength of these companies that have kept me positive throughout the market turmoil. Or stocks like MCLL ($5.62) where insiders purchased 500,000 shares at $5.3. The stock has consolidated for the past couple of years at its low and is just now beginning to breakout. NANX which I pointed out last week at $2.30 hit $3.0 this week. Even my doublers for the month made nice gains this week despite the overall weakness. A nice chart to look at for anyone interested in technical analysis is WARPF. A small Canadian company that has been trading in a very narrow range the past six months. Look at the monthly chart the pattern becomes much more apparent. Then look at the last couple of days worth of trading the stock is climbing on heavy volume. It hasn't broken just yet. But now its crunch time. A break one way or the other is imminent. Seeing the pattern on the chart and knowing what the ramifications were, would have allowed you to buy the stock one week ago in the $1.30 level, it closed at $2.0 Friday. If it breaks out here the stock will fly.
So I still believe we're about to see a rally that will affect stocks across the board. Of course, I will feel much better after another week or so of solid gains.
Have a nice weekend.
SO |
