Always pay attention to the market leader. During the bear market financials led the way down and any relative weakness in them was often a great tell of impending general market weakness.
On the way up it's been tech which has been the market leader and that's a good thing because the tech sector is the engine for long run economic growth potential in the US and a healthy bull market should have such a sector leading if it's going to have legs in the long run. We have seen the NASDAQ break out here and so we shouldn't be too surprised if the SPX soon follows suit. A push to 1150+ before the year is up is doable and yes, I still think the market is running on fumes and if we saw this breakout to 1150 it would likely be retraced eventually to 1100 or so at least.
From sources I've been reading, 4th quarter earnings are poised to be quite good again and we have the non-farm payrolls coming up in 6 trading days which is in position to show a positive number for the first time in about 2 years. Despite this potential good news however, if the market continues to run up like this, it runs the risk of a "sell on the news" reaction.
But the bottom line is this; making money on the short side will always be difficult and frustrating when you are swimming against the stream like this i.e. when a firm uptrend is in place with fundamentals incrementally improving. It doesn't matter what bearish signs may be out there...momentum can simply render these bearish indicators to get more extreme before the market finally responds. I think I've hammered this point home many times but it's worth repeating. It works the same way with bullish indicators in a bear market. I remember many times in 2008 when people would say "the market is oversold it's gotta bounce here" but the market simply became even more oversold.
The rydex indicator I've been mentioning has been swinging violently back and forth from bullish to bear in whipsawed frenzy. It's now back neutral territory giving the SPX room to make that final push higher to break out to new YTD highs. Again, if we do see a break out I suspect it will get retraced eventually because we don't have the "powder keg" type build up of ST pessimism in the market as per the behavior in the VIX, the put/call ratio and bonds.
I would like to wish all a Merry Christmas! All the best to you and your family!
The stock hit 52-week high of Rs 915, up 7.4% on BSE in intra-day trade, after the company said it has received an order worth of Rs 8,183 million from Navayuga Engineering Companycapitalstars Services
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