Today's volume and the nice move up may convince some
people that the bottom has been put in on the S&P500,
Dow and NASDAQ. Personally I think the real clue is the
XLF. It is impossible for a SUSTAINED rally in the
markets without the financials helping the move. It is
true that the markets can move up, but without the
financials regaining the 200 day and then moving back to
the 100 and then 50 day moving averages, every rally
higher has to be considered suspect. Today the Ultimate
Oscillator and MACD are still negative. I have made the
mistake in the past of trying to second guess these
indicators and moving to the uptrend side. Instead it is
obvious to me that the Ultimate Oscillator and MACD are
STILL NEGATIVE and the index is STILL BELOW the 200 day
moving average. The chart on the XLF looks absolutely
terrible and has since January. It is filled with lower
highs and lower lows. Until this changes here is what I
am going to be doing:
From here on in, until the XLF regains the 200, 100
and 50 day moving averages, any move higher is just an
opportunity to close naked puts that in good profit
positions. Any move lower is a chance to sell out of the
money naked puts on my favorite stocks.
I will be watching the XLF and my two favorite
technical tools - the Ultimate Oscillator and the Moving
Average Convergence/Divergence or MACD for short. Even
if these indicators turn positive, in my book the
uptrend will be a rally until the financials start to
carry their own weight. A rally can last for days or
even weeks, but until the financials return to help this
market, every rally has to be suspect. This means that
EVEN if the market can make a NEW HIGH, it remains
suspect in my strategy and I will continue to stay with
the strategy cautious bull that I commenced January 2 of
this year.
Meanwhile for another view on the market and a
bullish one,
here is a technician group, that I follow, Birinyi
Associates, from today's
www.bloomberg.com.
If their outlook turns out to be true then any major
downturn such as the one we are experiencing right now
should end up being a buying opportunity. Personally I
intend to watch the XLF for clues as to the market's
direction.
SUMMARY
There is no reason to fear this market for those of us
who are interested in owning great companies at great
prices, but for buy and hold investors or those
investors with low comfort zones, I would be staying out
or raising a lot of cash and I mean a lot of cash
because I believe the chance of the market moving lower
is high until the financials assist this market.
.
