Skip to main content

After being wrong for two weeks, am I finally seeing the glimmer of a bottom?

This is a quick post announce that the Thursday Alert HQ signals are available. Predictably, SELL signals predominate. After two weeks of nearly non-stop selling that is no surprise.

What is a surprise is that the Swing Signals list is nearly all BUY signals. There are only 20 Swing Signals today but only one is a SELL signal. A preponderance of BUY signals generally suggests that the market is ready to turn up.

Should we trust this indication and bet on an upturn? Nineteen BUY signals comprise a shaky foundation for expectations for a rally. After all, today the market was merely less bad so these 19 stocks are a pretty small percentage of the 6000 or so stocks that we evaluated at Alert HQ tonight.

Given that we look at so many stocks at Alert HQ I thought I'd show a chart of the Russell 3000 which can be used as an approximation of the whole stock market.


So many analyses have focused on the emerging head and shoulders pattern and various support levels. In contrast, this chart shows the Fibonacci retracement lines.

You can see that RUA has dropped down to the first retracement line. Essentially, this represents a pullback of almost 18%. We could indeed see a bounce at this point but a failure to resume the up-trend would portend a drop to the 50% retracement line. That would be equivalent to a 23% drop from the peak in absolute terms. In other words, definite bear market territory.

Times that test self confidence --

I've been convinced that fundamentals have been slowly improving. What is apparent is that this improvement will not proceed in a straight line. The V-shaped recovery has always been an unlikely scenario after such a severe shock to the global economy. Things like the ISM index are still solidly above 50 which shows growth, company guidance is mostly optimistic (remember, earnings season is about to start) while the jobs and housing pictures remain gloomy. All in all, a muddled situation but not a doomsday scenario.

Be that as it may, the market has adopted total pessimism and has continued to sell off, regardless of any positive signs in economic reports. As I kept predicting the market was about to recover, it did the opposite. The fact that I have been dead wrong on the direction of the market these last two weeks makes it hard for me to be confident that a bounce is on the way now. Nevertheless, just when you throw in the towel is often when markets turn around. Keep an open mind and keep an eye on those company earnings. Stocks are much cheaper and this may turn out to be another buying opportunity like back in February.

Comments

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Thursday Bounce: Trend Busters, Swing Signals and Trend Leaders for July 9, 2009

This is a quick post to announce that we have published Thursday's Trend Leaders, Swing Signals and Trend Busters at Alert HQ . All are based on daily data. Today we have the following: 72 Swing Signals -- A couple of days ago we had 35 signals, today we have twice as many. Happily, we now have 65 BUY signals, a mere 4 SELL Signals plus 3 Strong BUYs. Whoo-hoo! 56 Trend Leaders , all in strong up-trends according to Aroon, MACD and DMI. There are 18 new stocks that made today's list and 60 that fell off Tuesday's list. 48 Trend Busters of which 5 are BUY signals and 43 are SELL signals The view from Alert HQ -- Talk about mixed signals. If you look at our Swing Signals list you would think the market was in the middle of a big bounce. BUY signals are swamping the SELL signals and we even have a few Strong BUYs. Yes, there's a good sprinkling of tech stocks and tech ETFs but the distribution is pretty broad-based with a good number of different sectors represented, eve

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional