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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (35701)	12/28/2001 1:43:32 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 67987

[madtrader] Fri Dec 28, 9:24am PST $DJI $NDX.X $SPX.X $BTK.X $BKX.X Since this has been a very slow week, I am going through the charts again. One thing got my attention. Guess what is the one thing all of the above indices have in common? All of their weekly RSI line have crossed above 70 (using 14 bar reference). Something I have not seen since March of 2000. Some of you out there might choose to view this another sign of the market being overbought and perhaps reason to exit. I choose to look at it from a more bullish side. I have found that the crossing of weekly RSI above 70 is sign of strength. Which often leads to much bigger gains to come. I know this time of the year pundits like to make projections for the market for next year. The majority of the pundits I have read are either "cautious" or bearish. CNBC seems to have adopted the often quoted 7% annually as the medium rate of return for the market in the next decade. And we also got projections from the market strategiest of all the major brokerage houses for S&P going anywhere between 950 and 1600. I have say that is just lazy analysis. It doesn't take a genius to see that's the top and bottom of the trading range for S&P over the past 2 years. I believe that when the consensus are all bunched together as they have now with low or "no" expectations for the market, the market will surprise all of us next year with one of the best year in a decade. 1600 for S&P? Too low, from the starting point today, that would be a nice 37% return. But I believe we will easily surpass that. Of course, there will also be a bunch of people out there saying I must be on drugs, particularly with the S&P trading north of 30 times projected earnings already. My answer to that is, first of all, those projection are way too low. If one wants to see how strong the recovery is going to be in this economy, look no further than the outstanding performance of housing, consumer cyclicals, and discount big box retailing stocks since September 11th. The message of the market is that not only will we have a recovery, but a huge one at that. That does not mean I am going to chase the cyclical names going forward. When the economy does pick up steam (it will be sooner rather than later), it will be the growth names that will shine, not the cyclicals. My second comeback to those who are afraid of this tape due to a high p/e ratio is that price to earnings ratio for the market has never had any predictive value for the market going forward. It merely measures where you are, and not where you are heading. Therefore, I would not use that as a yardstick at all. Same goes with stocks. I have said before that when cyclicals names trade with low p/e, it is the time to dump them. One should buy them when they are trading at high p/e. This market has going through a cyclical downturn, and the upturn is underway right now. But we are still early in the process. I can understand that the mindset that has sunk in deep after a brutal 2 year bear market is tough to change overnight, just like all the people that were in denial when the tape was going down after a long bull run. I can see all the research and analysis going through people's head trying to find fault with this market, just as people trying to justify the lofty levels of late 90s. But change one must. none. [madtrader] Fri Dec 28, 8:38am PST INRG Pretty nasty high volume drop today. CEO quit, and the 200 DMA looks to be the last line of defense. Should it break below 200 DMA, it would be a nice short setup. none