Market Discussion

[AussieTrader]

Yep I am bullish on the SPY also. I trade the SPY and XAO (Aussie top500). XAO which has just broken out to all time highs today. It's pattern resembles SPY closely over time. Don't think though today we get the SPY breakout after consolidation, but I think soon.

[David Randolph]

Yep I am bullish on the SPY also. I trade the SPY and XAO (Aussie top500). XAO which has just broken out to all time highs today. It's pattern resembles SPY closely over time. Don't think though today we get the SPY breakout after consolidation, but I think soon.

Thanks for this Aussie. The strength in the Australian market can be a nice explanation to why ICOC has been so strong lately, the company derives a meaningful part of its revenues and most of its growth from its Australia unit.

The SPY touched the $150.59 support level, prior resistance. The way the market reacted to the negative news on the consumer confidence front and housing market tells me we'll have a powerful bullish engulfing day today, with the SPY closing above its yesterday high of $152.82. We'll see

[AussieTrader]

Consolidation to breakout pattern still in play for the SPY. Closing within the tight flag. Breakout and close above the purple line is what I am positioned for:

[AussieTrader]

I should start an index thread somewhere else. This thread perhaps is not the ideal one for this.  Anyway continuing the conversation re SPY I think we get David's bullish engulfing type day today. The market just wants to move upwards. I think 1550 highs are just days away.

[David Randolph]

Judging from what the DAX did just now I guess there's going to be a pretty ugly sell off in the market today

Perhaps it is better this way, to put some ice in the speculative heads pushing up stocks just because they're Chinese, not looking at the fundamentals. Every time the fast money shows up, the market heads down to make the cleaning.

Longer term the bull market will continue, in my view. That is, good stocks will rise, bad stocks will fall.

[David Randolph]

I'm positive the SPY will make an higher low, that is, it won't close below $144.33 on this short term descending move, but it may very well go down below the $150.59 support line, to perhaps touch the green trendline you see in the chart below.

I guess this would be the point where people would start seriously questioning the effect of the FED rate cut and start claiming for more cuts from the FED, which the FED will deliver, because inflation is low.

And then we would have another leg up towards the all time high at $156.

Of course, this can be all wrong (probably), and these things keep changing. As for the Main Portfolio, it is filled with good stocks, I'm not going to do any market timing with them, as they're all long term investments.

[mbaugh]

Here's an interesting article that was written in 1999.

http://www.gold-eagle.com/gold_digest_99/tice040599.html

[AussieTrader]

..... The market just wants to move upwards. I think 1550 highs are just days away.

Q4 starts with a bang and delivers that breakout day challenging all time highs. Based on the Nas100 and DOW the S&P 'should' breakout again above the 1550 highs, most probably will require a few days consolidation to make that stick. I have taken profits on this move and will wait for confirmation on how it reacts to the resistance.

You may ask why I am trading S&P? Because I am using CFDs (contract for difference) in a particular account. CFD's give huge leverage opportunity (+20 times your account value). So, I can take relative large position sizes safely, only using a small amount of $ collateral. Plus, as the volatility on the index is only around 1 to 1.5% each day with no real risk of a 5 or 10% down day (like with a stock delivering unwelcome news) the risk reward is nice.

[BigSully1]

DOW is still holding above it's July 14022 high, thus far. $RUT Russell 200 small cap has been in the green again all day, still is. RUT has underperformed it's large/mid cap brethren thus far this year. Is it time for it to play catch up and again outperform? With a decreasing interest rate environment I would think so, but will/can they cut again?

[David Randolph]

Is it time for it to play catch up and again outperform?

I don't know, I could never figure out which factors make small caps outperform or under perform large caps. I prefer to play it from a company specific standpoint and take the S&P 500 as a barometer for the general market.

With a decreasing interest rate environment I would think so, but will/can they cut again?

It depends. If it's needed they'll cut, if it's not needed, they won't cut. The "need" will be told by where the S&P 500 is when the meeting takes place. My take is it won't be needed, because the S&P 500 will be at an all time high at October 18th.

The following sentiment studies tell me the current bull run won't stop on this side of $156:

MarketWatch readers rate risk of October crash
Narrow majority 'worried' or 'somewhat worried' as more than 12,000 vote

A lot of sound and fury
Commentary: Newsletters remain largely in cash, despite Dow's record high

People are still mostly on the sidelines, but they will be forced to get in as the S&P 500 breaks out to a new all time high. It has to do with the potential of money in and money out.

[BigSully1]

I think tighter money conditions can restrict small caps funding more so than large and if they are already heavily in debt, can be more burden on small caps.

I don't know who the Marketwatch pollsters are (big guys or retail) , but I fall somewhere btween 2 and 3, cautiously optimistic. I might err on the side of caution, but thats O.K with me. Seems to me you are still also cautiously optimistic as you have not yet fully invested yourself.

[BigSully1]

It depends. If it's needed they'll cut, if it's not needed, they won't cut. The "need" will be told by where the S&P 500 is when the meeting takes place. My take is it won't be needed, because the S&P 500 will be at an all time high at October 18th.

The following sentiment studies tell me the current bull run won't stop on this side of $156:

MarketWatch readers rate risk of October crash
Narrow majority 'worried' or 'somewhat worried' as more than 12,000 vote

A lot of sound and fury
Commentary: Newsletters remain largely in cash, despite Dow's record high

People are still mostly on the sidelines, but they will be forced to get in as the S&P 500 breaks out to a new all time high. It has to do with the potential of money in and money out.
[/quote]

David, I'm just wondering what you expect will drive the markets higher before Oct. 18, Good economic news, earnings reports or expectations of another rate cut? And then if the market is built up on expectations of another rate cut and they don't cut rates, then what? I don't think the market wants to hear very good news right now. Seems to me they only want tepid news and evidence of slowdown to further bolster the argument for another rate cut.

[ygtrdr]

Small caps also tend to do much better in lower interest rate environments because earnings growth often exceeds inflationary pressures much better than Large Caps.

[BigSully1]

I think tighter money conditions can restrict small caps funding more so than large and if they are already heavily in debt, can be more burden on small caps.

I don't know who the Marketwatch pollsters are (big guys or retail) , but I fall somewhere btween 2 and 3, cautiously optimistic. I might err on the side of caution, but thats O.K with me. Seems to me you are still also cautiously optimistic as you have not yet fully invested yourself.

O.K. David, I can't say you're not fully invested now and still being cautious, I see you bought 3 more positions for the port. Actually I'm about 92% in long positions and no short myself. About 8% cash. So I guess I'm really about as bullish as you are. Thinking about what you have been saying about on the sidelines within a wall of worry, and  also the way many top stocks have been behaving even on recent down market days is  very reaasuring.  Many are still breaking out  on strong volume and seeing new highs. Short interest ratios have hit all time highs is also very good news for us. So we need to forget all the gloom and doom predictions and just listen to the market, and the market is telling us to remain bullish, unless something changes, IMO.

[Rmagos]

Hi David

I`am wondering if you are trying to exploit the China hot market why not try a position in the Indian market as you know it also are hot... just an opinion

Thank you