I'm printing this from DWA because I think it is very important for everyone to keep their perspective. I know rallies like today drive everyone crazy and the cash burning a hole in your account is enough to send you strait to the loony bin - but remember last year. Here is a recap.
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Printed from Tonights DWA Market Analysis Report.
We will become more of a believer in the short-term rally when the option stock Bullish Percent comes along and reverses up.
Yesterday the Dow Industrials gave a triple top buy signal on its 50 by 150 chart and the S&P broke out. However, if you have followed us for years you know we place more emphasis on the NYSE Bullish Percent. The reason for that is simple. The Dow Jones and the S&P 500 can be pushed and pulled by a few stocks and has nothing to do with the broad market. We are much more concerned with the broad market as this is where most investors live, not in a handful of Dow Jones stocks.
We realize that perception is everything to the individual investor and your phone is ringing off the hook to go long. It also rang off the hook to go long on the new high in July 1998 when the NYSE Bullish Percent was unable to even reverse to the upside. If you tempered their enthusiasm then, they should have thanked you.
While we are talking about 1998, let's look at the action in the summer of 1998. Remember the Dow Jones, S&P 500, the New York Composite and the Nasdaq Composite all went to new all-time highs in July. On June 23rd, the short-term indicators reversed up and the Dow Jones was at 8820. We said as we always do "go long the market as the short term often turns into the long term".
We advised you to use stops, stops which were actually placed on the specialist's books as mental stocks do not often get executed. The stops would automatically take you out if you needed to be out. If the NYSE Bullish Percent reversed to the upside, we would take off the stops and think longer term. The Dow Jones subsequently went to 9338, making a new high, and collapsed from there. The Bullish Percent never reversed into a column of X's. The stops on those short-term trades were elected at probably higher prices (you raise stops whenever possible and trail the stock up) and you were put back into cash at the right time. During that time the A-D line never gave a buy signal exceeding a previous top until September 1998.
There are a lot of similarities but we aren't predicting. This is 1999, not 1998. The same plan exists. When the short-term indicators reverse up, we will go long the market with stops. It's that simple. Maybe it will be this Wednesday, maybe not. |
