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PoorBest August 10. 2009

New Heights for the Markets

After Friday's job report was released, the market seemed to exhale.  Traders breathe a sigh of relief, perhaps.  Well, I'm not sure about the bears...they may have been hyperventilating!  A close for the SPX over 1000, the Nasdaq over 2000 and the Dow over 9400....all new weekly highs for the year.  The money is flowing into stocks now and with bonds getting tripped that money is now directed toward equities.  It may be a bumpy ride, though.  Some sectors have gone parabolic...witness the financials, homebuilders, casinos and retail.  And while most are complaining about being overbought, no correction yet...the one thing I'm not hearing about is the broadness of this rally.  Many stocks have broken over their recent May highs and are now trading at highs for the year.   Oh sure, we've seen the little speculative names rise from the ashes...that's typical froth and speculation in a bull trend.  It sometimes is a sign of marking the end of such a trend, but is not always the case.

SPX Daily Chart

Be Careful Who You Listen To

Endless chatter and cautions, warnings and the like.  This is coming from the biased media (don't get me started!) and analysts.  Do they have your back?  Hardly so, when the outlets are trying to secure ad dollars and the 'experts' are talking their book.  Is there a more devious scheme?  What is really important is what Mr. Market has to say at all times.  How do we do this?  By watching the indicators, moving averages, price and volume charts do we really get an understanding of where/when the market is going and perhaps how far.  Why is timing so critical?  We're option traders, and time is of the essence!   We work in smaller timeframes in order to manage risk and time decay and to be in tune with trading trends.  The media, analysts, fund managers out there who give us sage advice?  The can be wrong for awhile before they get it right...again, stock traders or even talking their book.  We cannot be wrong for awhile or we'll lose big-time. 

Indicators Tell The Story

Is this a rational market?  All depends on your perspective, I guess.  John Maynard Keynes once said markets can remain irrational longer than you can remain solvent.  Definitely so for traders leaning the wrong way now.  Maybe all the bears have been blown outta the water, perhaps there is a new contingent of bears waiting in the wings to pounce on this market.  Whatever the case, it pays little to fight the trend, one that is as strong as we've seen in nearly 30 years, perhaps longer.  While the market may seem tired, in need of rest....I make the point:  WHO ARE WE TO TELL IT WHAT IT NEEDS?  We may get the correction, but I guarantee you most won't nail it right on the timing.  The market will tell us when it's ready, and we'll be watching the indicators.  For now, the trend is up, volatility is down, money flows are strong and equities are higher.  Until that changes, well...

Bob Lang,
BigTrends.com
1-800-244-8736