Vast Improvement

Every day the internals of the market continue to get better.  Yes, we’re not seeing explosive volume, but the volume that was there was much better based on the internals.  Low volume is to be expected with the election today.  We’ve been seeing the sellers exhausting.  Forced selling by mutual funds, hedge funds, margin calls, etc. has subsided.  The next step was demand.  We are getting more demand now.  And, the higher we go, the more demand will come.

Keep in mind, the market averages are up about 20% from the bottom just a few days ago.  Too far too fast?  Perhaps.  We’re getting a little overbought in the very short-term.  It’s nice to be able to say that.  First time in forever it seems.  I’ve been buying little pieces on the way up.  Areas such as healthcare, solar, technology, & utilities.  I think the most constructive thing the markets could do now is to have a weak pullback.  That would consist of no 90% downside volume days, not many new lows, lower volume, etc.  If we get that and complete the right shoulder of the technical pattern I referred to last week, we could have a bigger and longer rally.

So, caution is warranted for the very short-term.  I’ve been placing stops on various positions and moving them up as the market goes up.  Don’t let your guard down in this market.  There are lots of positive things happening right now, but volatility could return rather quickly.  The outright panic is behind us.  My crazy investor indicator has dropped to its lowest level in quite a while and so as the market has gone up, the fear has come down.  The credit markets aren’t frozen anymore and some earnings have been good.  For example, I mentioned Mastercard (MA) might report better earnings on the radio yesterday.  I discussed that with more and more people struggling, those people will be forced to use their credit cards, which will be good for Mastercard.  Remember, they get paid on the swipes, they don’t back the debt.  They came out with good earnings last night and the stock raced up 18% today.  So, we have some positive developments.  But, this is a trading market, not a new bull market.  We’re renting stocks.  Sure, you can buy some to keep through thick & thin but just keep in mind that you’ll have to ride out some rough times.  There will be great investments in the months to come as the economy gets worse and stocks get cheaper.  Right now, there are just good trades. 

Bottom line.  Trade around but keep your sell strategies for those positions you’re renting whether you use stop losses or technical analysis.

Strategy Session

I’ll be in Houston Thursday evening, November 6th to host a strategy session with Daniel Frishberg.  We’ll be showing you various charts and items we use every day to figure out where the market’s going.  We’ll also be discussin how the election will impact the markets going forward.  And, we’ll be talking about bonds and what values we see for income investing.  It’s a free event but you must register at www.bizradio.com or you can call 877-8BIZRADIO.

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