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Thread: Short Term Outlook

  1. #13

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    Short Term

    November 10, 2005

    Comments:

    The S&P closed out at 1230.96 with an advance of +10.31.

    The previous peak of 1228.81 on 9/30/05 was surpassed, confirming the 2nd leg of the primary bull market.

    According to The Dow Theory:
    When the previous peak is surpassed, the beginning of the second leg and a primary bull will be confirmed.
    Primary Bull Market - Stage 2 - Big Move
    The second stage of a primary bull market is usually the longest, and sees the largest advance in prices. It is a period marked by improving business conditions and increased valuations in stocks. Earnings begin to rise again and confidence starts to mend. This is considered the easiest stage to make money as participation is broad and the trend followers begin to participate.

    Will the 2nd stage hold?
    The question is easy, the answer is hard! The reality of the situation is that nobody knows where and when the primary trend will end.

    That was a very general answer, why?
    Even though the theory is not meant for short-term trading, it can still add value for traders. No matter what your time frame, it always helps to be able to identify the primary trend.

    The critical issues:
    The market will support the primary bullish movement, provided the fundamentals stay in place. Items that can cripple a movement are business conditions which relate to the 4 Horsemen of rates, inflation, energy and earnings. There are also outside factors that can influence the movement such as terrorism, storms, and etc.

    Short Term game plan (IMHO):
    For the short term it will pay to be vigilant. The play is to protect gains. Have a exit strategy in place.

    Rgds, and be careful! Spaf

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  3. #14

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    good sign...$dwcp overcoming s$p 500going in to end of day, small caps/naz lead upas well asdown...slow today with no bonds, monday = real take-off?

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  5. #15

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    The Kingdom of TSP

    The Dark Cloud

    (what goes up has to come down)

    While the market is going up, it is time to prepare for the following bearish primary movement, which is sure to come. It may be in weeks, months or years. In 2005 the movement change has been within month(s).

    According to The Dow Theory:
    The Primary Bear Market - Stage 1 - Is Distribution.
    Just as accumulation is the hallmark of the first stage of a primary bull market, distribution marks the beginning of a bear market. As the "smart money" begins to realize that business conditions are not quite as good as once thought, they start to sell stocks. The public is still involved in the market at this stage and become willing buyers. There is little in the headlines to indicate a bear market is at hand and general business conditions remain good. However, stocks begin to lose a bit of their luster and the decline begins to take hold.
    While the market declines, there is little belief that a bear market has started and most forecasters remain bullish. After a moderate decline, there is a reaction rally (secondary move) that retraces a portion of the decline (classic: the period after 09/12/05).

    In reviewing the S$P 500 and the last four peaks: June, August, September, and October.

    See StockChart.com: S&P500 Large Cap Index ($SPX)
    Link ----> http://tinyurl.com/6a2eu

    A "dark cloud" or a variation could be identified in each of the four prior peaks, which is a candlestick reversal signal after an uptrend, warning of "rainy days" ahead. The dark cloud was not text book, but it could be identified within 1 to several days when the uptrend hit resistance and prices started to move sideways.

    The long white candlestick indicated that buyers were in control, which is bullish.
    The long dark candle stick indicates that sellers were in control which is bearish

    Noted that sometimes the dark candle formation may be one or two days, but a higher high is not re-established.

    There are two other indicators that would coincide with a dark cloud: the MACD trend and the signal on the slow-stochasitics.



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  7. #16

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    Short Term

    November 16, 2005

    Reuters
    UPDATE 2-U.S. stocks pause as Dow tries to pop above 10,700

    Wed Nov 16, 2005 06:32 PM ET


    Link to Article ----> http://tinyurl.com/7a6u4


    Rgds, and be careful! Spaf

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  9. #17

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    Today will be a good day.

    The core CPI was up a modest 2.1% over the last 12 months

    The bond market believes inflation is contained.

    The Nikkei is +241

    The DAX is +46

    The FTSE is +39

    There has been a lack of conviction in this pull back - onward and upoward.

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  11. #18

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    Birchtree wrote:
    Today will be a good day.
    Good call Dennis!



    Let's hope Grandma keeps her umbrella open against rainy days!


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  13. #19

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    Alright - now that I have courage - I'll go for another up day. GE seems to be the leader for the future and Nikkei is up another +211. I wouldn't be surprised if the S&P closes above the resistance level of 1245. Whew!!

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  15. #20

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    The stock market's gains this past week came as yields on short term and long term Treasury bonds converged - a tren called a flattening of the yield curve that suggests the Fed's campaign to raise short term rates could stall the economy.

    An inversion of the yield curve would be s serious occurrence - despite what AG has stated publicly. The Fed has tightened eight times in the past three decades, and the Treasury yield curve has inverted five times. Each time the curve inverted, the economy slipped into a recession a year later. In late trading Friday, the gap between yields on 2 year and 10 year Treasurys stood at about one-tenth of a percentage point, down from about three -tenths in September.

    Lead times vary between the inversion of the yield curve and a subsewuent profits recession. The shortest lead time was six months (June 1989) and the longest was 24 months (June 1973) and (December 1978). The average was 14 months. Equally important, S&P 500 earnings growth rates varied from cycle to cycle. The strongest profits growth when the curve inverted was 22% (August 2000) and the weakest was 8% (January 1969). Definitely something to remain apprised of.

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  17. #21

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    The market seems to be advancing too fast without a breather:a correction!

    RSI is over 70 indicating overbought conditions.

    http://www.incrediblecharts.com/tech...ngth_index.htm

    Be careful! Rgds Spaf

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  19. #22

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    Short Term

    IMHO

    In keeping an eye on the charts, the S&P 500 (C-fund) has made some very fast advances in the last few weeks. And, there has ben no correction in the recent advances. The Relative Strength Indicator (RSI) for the S&P is over 70, meaning it's overbought.

    The advance is at a very steep level. Meaning that when a correction is made (a secondary movement), the primary movement (being bullish) has a higher risk.

    In explaination, I've included an attachment of the iShare Brazil fund [EWZ]. The fund has been advancing quite nicely in the bull market. However, in September the fund got off track and became hot with steep advances. The RSI for the fund cruised in the overbought level. In October the fund got so hot a correction had to be made to cool it off. The fund cooled off till late October with it's RSI in mid range. In late October with the sustained bullish primary movement, the Brazil fund returned to it's normal advances.

    The steep advance in the Brazil fund created what one could call a bubble. Advances should be moderate with periodic corrections; creating a sustained advance. When the correction hit the Brazil fund in early October it was fast and steep.

    I have used a fund outside TSP to illustrate a trend, and also to indicate there are funds outside TSP that are excellent in performance, or an alternate to TSP. The YTD % for [EWZ] was 51.84. Latin America [ILF] was tops at 53.54, both were ETFs. Other ETFs [IVV] S&P500 was 4.98. [IJR] Sm Caps was 8.95, and [EFA] was 9.52.

    Rgds, and be careful! Spaf

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  21. #23

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    For those interested in emerging markets Vanguard has a "diversified" emerging market ETF. Its return over the past year has been unreal, so I believe I will wait before I take that plunge.

    Looks like a good day with Asia and Europe up thus far; most of us are expecting some kind of correction soon, yet year to date returns are belowhistorical averages.I look at the price of oil stubbornly stuck at $57-58 a barrel during aso far mildweather season.

    I'll continue to hang at 80/20.


    From Bloomberg:

    Economic Reports

    Gains in Treasuries may be tempered by speculation reports next week will show the economy is strengthening.

    The Commerce Department on Nov. 29 is likely to say durable goods orders rose in October for the second month in three. The following day it will probably say the economy in the third quarter grew at a faster pace than initially estimated, economists surveyed by Bloomberg forecast.

    The Labor Department a week from today may say employers added workers to payrolls at the fastest pace in four months, according to the median estimate of economists.

    ``Conditions in the U.S. are still buoyant,'' said Michael Thomas, an economist and fixed-income strategist at ICAP Australia Ltd. in Sydney, a unit of the world's largest interbank broker. ``Ten-year yields at these levels are still expensive.''

    The 10-year yield may rise to 4.75 percent at the end of the year, Thomas said.

    Citigroup Forecasts

    This year, Treasuries are up 1.82 percent, the worst performance since 1999, when they fell 2.38 percent, according to Merrill indexes.

    Ten-year Treasury yields will fall to 4.25 percent in the fourth quarter of 2006 as growth and inflation slow, according to Citigroup Inc. in a report to clients published Nov. 23.

    The Fed will raise rates to 4.5 percent in the first quarter, before bringing the figure down to 4.25 percent by year- end, matching the 10-year yield, it said.

    ``U.S. interest rates likely will peak early in 2006,'' said the report, written by the global markets team headed by chief economist Lewis Alexander in New York. ``A modest deceleration in the economy should curb inflationary pressures.''

    Consumer prices rose 0.2 percent in October, the smallest increase since June, and producer prices excluding volatile food and energy costs declined 0.3 percent, the most in more than two years, government reports last week showed.

    Code:
    To contact the reporter on this story:
    Shamim Adam in Singapore at  sadam2@bloomberg.net.
    Rodrigo Davies at  rdavies13@bloomberg.net



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  23. #24

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    Short Term

    November 29, 2005

    In the last few days the market (S&P 500) has moved into a secondary movement, a correction.

    We have experienced a "evening star" and a "gravestone" in the daily fluctuations!
    The top chart was the RSI: above 70 indicating overbought conditions.

    RE: http://www.incrediblecharts.com/tech...ndlesticks.htm



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