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Coolhand's Market Analysis

Too Late to Buy?

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6 Comments
by
coolhand
, 02-05-2012 at 02:27 PM (2772 Views)
I didn't really realize it till today, but looking at the top tier of the tracker the Top 4 are separated by just 0.69%. And in fourth place is the 7-Sentinels. And the 7-Sentinels shares fourth place with exactly 50 other TSPers. Behind that group you can go all the way down to number 96 and still see folks with returns in double digits. This group is kicking some major booty and there are many more even below that level that are sporting some very impressive gains too.

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Is 2012 going to be a banner stock year? I don't know, but it's certainly looking pretty darn good so far even if it is still quite early in the year. But I know there's still some bumps coming too.

Is it to late to buy? If one goes strictly by the Seven Sentinels, I think the answer would be no. The charts look good and as long as volatility remains subdued the Seven Sentinels should remain a decent predictor of prices moving forward. But that's a big "if" when it comes to volatility.

Sentiment is part of the equation too and that's played a big role in higher prices as well. And while we're a bit more bullish sentiment wise going into the new week, we're still collectively sitting largely in cash. And that includes me. Our sentiment survey came in at 50% bulls and 42% bears, which keeps the system in a buy condition.

Here's the charts:

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Transfer 5/25 for 5/26/04-2012-top-50-trend-jpg

Little change in the Top 50. All stocks.

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Last week the herd (total tracker) had dropped their collective stock exposure a little over 2% to an allocation of about 34%. This week, they've essentially put that 2% back into stocks and now have a total stock allocation of 36.33%. That's not a meaningful shift.

To me, little has changed over the past three weeks or so. Our sentiment survey remains on a buy and our collective stock allocations are low enough to lend support to that signal. And of course the Seven Sentinels also remain on a buy.

As I had mentioned previously, I tend to think the market has more upside yet and I wouldn't be surprised to see the S&P 500 push past 1400 at some point down the road.

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  1. RealMoneyIssues's Avatar
    When was the last time the top 50 were so high in stock allocations? I am really wondering why the market is doing so well, we have so many in AT in stocks AND yet have 42% bears???
  2. EmoDx's Avatar
    Quote Originally Posted by RealMoneyIssues
    When was the last time the top 50 were so high in stock allocations? I am really wondering why the market is doing so well, we have so many in AT in stocks AND yet have 42% bears???

    IT's hard not to be bearish. The major volatility Aug - Sep was hard to stomach. And we still have Greece, not to mention Italy, Portugal, and possibly Spain. Let's just say the GIPS can Gyp us at any moment.


    Jaime Diamond said that is Greece defaults, it poses no threat to the US banks. Ok, but when the FED has to provide liquidity to the ECB and other major national banks to keep the entire Fiat currency afloat, well you get the picture.


    No, the FED doesn't have to provide liquidity to other systems. But, if the Fed thinks by not providing liquidity to these banks the US economy could be affected, they will do so. Look at the foreign transactions at there "Liquidity Window" in the past 2 years.


    So yes, a Greece default could be absorbed. But if you believe Greece is the first Domino of the Fiat currency system, then you have every right to be bearish.


    -Emo
  3. Unregistered's Avatar
    Fiat money originated in 11th century China,[1] and its use became widespread during the Yuan and Ming dynasties.[2] The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then all reserve currencies have been fiat currencies, including the dollar and the euro.[3]
  4. KeyserSoze1922's Avatar
    No, I don't think it's too late to buy. I believe that this current bullish period may last a few more weeks to a few months. If that is correct, then now is a very good time to buy.

    1.a. ELLIOT WAVES: In terms of Elliot Wave Theory, a Bull Market is said to consist of 5 waves (3 UP waves or movements, inter-spaced by 2 corrective downswings). The basic Bull Market structure consists of the following: an advance (Wave 1), a corrective downswing (Wave 2), another very strong advance (Wave 3), followed by another corrective downswing (Wave 4), followed by a third rally (Wave 5).

    b. CURRENT MARKET: It appears that both the S Fund and C Fund may be currently in a Wave 3 advance within a bullish 5 wave pattern. If correct, then this is very good/bullish news because Wave 3 is typically the largest of the waves, and hopefully continued gains can be expected. Accordingly, this is a very good time to be in the S Fund (and/or the C Fund, although C generally doesn't rise as fast as S).
  5. coolhand's Avatar
    Quote Originally Posted by KeyserSoze1922
    No, I don't think it's too late to buy. I believe that this current bullish period may last a few more weeks to a few months. If that is correct, then now is a very good time to buy.

    1.a. ELLIOT WAVES: In terms of Elliot Wave Theory, a Bull Market is said to consist of 5 waves (3 UP waves or movements, inter-spaced by 2 corrective downswings). The basic Bull Market structure consists of the following: an advance (Wave 1), a corrective downswing (Wave 2), another very strong advance (Wave 3), followed by another corrective downswing (Wave 4), followed by a third rally (Wave 5).

    b. CURRENT MARKET: It appears that both the S Fund and C Fund may be currently in a Wave 3 advance within a bullish 5 wave pattern. If correct, then this is very good/bullish news because Wave 3 is typically the largest of the waves, and hopefully continued gains can be expected. Accordingly, this is a very good time to be in the S Fund (and/or the C Fund, although C generally doesn't rise as fast as S).
    Thanks for the Elliot wave perspective.

    I am suspicious that QE3 may already be part of the equation. If so, this market could go higher for an extended period of time just as with QE2. That would explain the drop off in volatility too.
  6. Birchtree's Avatar
    Keep in mind that the center point (point of recognition) of wave 3 will have the most amount of participation by both breadth and volume related charts. We could easily see multiple 3 digit Dow up days in a row in the future - wait for it.

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