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

To: Johnny Canuck who wrote (42774)	11/6/2005 9:23:01 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69822

November 6, 2005 Market Week The Bad Signs Are All Pointing Up By CONRAD de AENLLE WITH September and October - historically the two worst months on the calendar for the stock market - out of the way with minimal damage, one analyst is gearing up for a year-end rally. "After a 4 to 7 percent decline in the major averages from their midsummer highs, the market appears to be in a bottoming process," said Richard McCabe, technical research analyst at Merrill Lynch. "This should eventually provide the foundation for a late 2005-early 2006 recovery during which those averages could moderately exceed, or at least challenge, their summer peaks." Just as any good drama needs the hero to overcome a formidable obstacle before there can be a happy ending, the market needed to fall last month to set up the chance for a strong 2005 finish, Mr. McCabe suggested in a note to Merrill clients. "Since 1950, the month of October has registered a net loss, as measured by the S.& P. 500, on 22 occasions," he noted. "However, 18 of those 22 down Octobers were followed by a net gain, averaging 5.9 percent, for the combined months of November and December." After a decline of 2.16 percent last month in the Standard & Poor's 500-stock index, he said, "the prospects appear to be favorable for a year-end rally." As a technical analyst, Mr. McCabe is less interested in corporate earnings and economic data than in patterns on stock charts and indicators of sentiment and momentum that have been shown to foretell moves in share prices. Those measures send the same message as the calendar, in his opinion. "Sentiment indicators continue to show a healthy shift to caution or bearishness," he said. Lopsided negativity among investors often precedes a rally. Measures of internal market strength, such as the difference in the number of issues gaining and losing each day, and the trading volume in the two respective groups, also point to rising share prices, he said. He warned, though, that "this does not rule out some further downside tests in coming weeks" before the advance. DATA WATCH The first test may come on Thursday, with the report on the nation's trade balance for September. Economists polled by Bloomberg News estimate a deficit of $61 billion, up from $59 billion in August. Later that day, the University of Michigan releases its preliminary assessment of consumer confidence for November. The Bloomberg prediction is for a reading of 76.7, up from an October figure of 74.2. The state of another deficit will also be announced on Thursday. The government is estimated to have spent $51.9 billion more in October than it took in, according to the Bloomberg poll. That would be a narrowing of the monthly fiscal deficit from $57.3 billion in September.