Markets have turned UP with stronger volume...which is a good thing.....
The question IS.....what has triggered this latest RUNUP.....
Technicians & bears faithful spokesperson Art Cashin was harping on an imminent disaster by 17th of July in markets..translation ...we were suppose to hit major downtrend and make lower LOWS?????
BUT.....we have closed @ new yearly highs on Nasdaq back to back right on "opposite cue for 17th of July"......
SO...does it pay to listen to CNBC???
I am afraid NOT......
It has cost most of the traders HUGE "missed opportunity" as CNBC keeps bringing "the worst commentator before market opens"
Art Cashin of UBS has become "the biggest Joke on CNBC".......
I do NOT have CNBC in my TV lineup..I check some of the segment through Internet ..because they give me the biggest CONTRARY indicators......
Now back to where indices are headed......???
The biggest tool which I use is RSI......
It has given ME the ONLY reliable indicator to trade from......
I interpret RSI based on the economic trendlines...which means as the economy improves RSI will have higher highs and higher lows......
So..WHY did we go to such a lower low read on RSI????
Because markets always RETEST support after a major move UP........which we completed week of July 10th......RSI went down to below 40 which was lowest in last 4 months..many stocks retreated to their support level in this RETEST......
This RETEST made a solid base to rally from AGAIN......
Before going into where the markets are heading..it IS important to be a BELIEVER in any form of technical indicator..be it MACD,Bollinger Band or many other indicators....but it IS important to KNOW the changing RANGE & the fundamental reason as to WHY we MAY go LOWER on the reading or HIGHER......
Based on my OWN interpretation of RSI & background take on economy & traders sentiments...which IS an ART not a science...we are heading HIGHER on RSI & Markets......
Generally when we hit RSI 30 on Indices..it IS a BUY and when we hit 60 it is a sell......but we are going to go Higher in RSI beyond 60???? currently we are @ 61.54 in S&P 500......
So what is the prediction for all indices.....based on www.stockcharts.com as of Friday close:
S&P 500 target 1085
Dow target 10,100
Nasdaq target 2190
So if we take Friday closing number the above prediction is implying a move of :
S&P 500 144.62 points or 15.38%
Dow 1356.06 points or 15.5%
Nasdaq 303.39 points or 16.08%
NOW ..the problem with prediction like the above....it does NOT happen in straight line.....
You must KNOW your strategy well...stocks & indices go through resistance & support.....& they do mark time.....
I do expect the indices to make higher HIGHS in this RUNUP...all of them are set to do so....but above 70 in RSI..a "cautionary approach is HIGHLY recommended"
Markets OVERDO on UP move also which IS hard to predict......
Markets are looking AHEAD all the time.....sometimes market KNOWS more than us mortal souls...
Markets COULD be looking @ strong Q4.....which implies strong order trend in Q3..where we are NOW......
So do NOT be surprised @ sudden burst in indices........
Based on my SIMPLISTIC calculations.....I will not be surprised to see S&P 500 @ 1043 in this RUNUP which implies a move UP of 102.62 or 10.91%.....before consolidation sets in.....a similar or better % move should be expected in Dow & Nasdaq.....
So..based on my "simplistic calculations"........how do you play this RUNUP????
Always KNOW what you are buying based on FA/TA..look for relative attractiveness..means.... is your stock ready to move UP compare to others in the same sector as they have lagged the leaders....a very important analysis...or you are comfortable taking higher risk by chasing the leaders......
No matter what you do remain DIVERSIFIED in different sectors......
Not all sectors move on a daily basis so you NEED exposure in strong & WEAK sectors to OPTIMIZE your strategy:
I have done my strategy based on my comfort level & here is the $ allocation & sectors :
EGO Gold 4.04%
GNK Shipping 9.00%
IPI Potash 8.50%
MRVL Tech 11.47%
SOL Solar 16.21%
RIMM Smartphone/Tech 20.63%
SLW Silver 3.70%
TLM Oil 26.45%
Please do your OWN homework based on your risk tolerance & comfort level.
Markets are extremely unpredictable & CAN correct anytime without any KNOWN reason..so KNOW your EXIT strategy beforehand.
BLOG does NOT give buy or sell.
Saleem
9 comments:
SALEEM
Interesting comments on GS:Goldman Sachs (NYSE:GS): Upgraded to Buy at Meredith Whitney Advisory Group
Meredith Whitney Advisory Group is upgrading Goldman Sachs (NYSE:GS) to Buy with a 12 month price target of $186.
Firm notes their more bullish outlook on GS shares is deeply rooted in their sustained bearish stance on the US economy and state of US financials at large. Specifically, they expect a tsunami of debt issuance from federal/sovereign, state, and local governments ramping up debt issuance to fund woefully underfunded budget gaps. In addition, they expect corporate debt issuance to be at least 60% as strong as peak cycle levels reflecting sizable debt maturity rolls. What’s more, given fewer market players, not only is GS benefiting from market share gains on these products but more widely in derivatives products.
To be clear, the firm notes reasons for liking GS stock today are drastically different than any they have had recommending the stock on and off over the past decade. In the past, GS shares were a great play on equity markets and expansive global GDP. While that may still hold true down the line, their thesis today is that they expect GS to be the key competitor in some of the most unpredictable markets: government, corporate, and municipal debt. With those markets, GS handily layers on its suite of derivative products. For that, they expect GS to earn roughly a 16% ROE through 2011. Using those modest return hurdles, the firm derives estimates that are roughly 30% higher than Street consensus and a 12 month forward book value per share in excess of $124. Firm's price target is based upon a combination of a 1.5x multiple to forward book value as well as a 9.5x multiple of 2010 estimated EPS.
Hi Madmax,
Thanks for posting Meredith Whitney's comment ...she is a very good analyst and has been accurate in predicting the meltdown in Banks & Financials.....
Very interesting analysis !!!!
Saleem
Hi Madmax,
GE has always been somewhat of a dog. You can always trade out then come back later if you see another opportunity. If the economy starts to turn up, we're looking at $19-20 per share IMHO. Hey fresh lunch money from calls every month is good.
Best Regards
Hi Saleem,
Commentary is good. We had a nice runup from the bottom, then a pull back, now a new base, equilibrium is being met. 10,000 on Dow may be ambitious speculation. No real reason to feel good about the economy YET. Major retailers still closing down here in ATL. Consumer confidence not so confident. A summer rally would be nice, but we might retrace all of it IMHO.
Best Regards
Hi Standards,
Thanks for your feedback.
Markets always end up going UP or Down more than what most traders expect.....
So..I am always ready for higher or lower number than general consensus.....
Most traders do not expect market to go higher than last resistance around 8877 in Dow....that is why it MAY surprise us on the UPside....
I will not be surprised if Dow climbs easily above 9400 before this runup is over......
Then back to another test of support around 8800...
Saleem
Hi Saleem,
Yes, 9400 would be nice, bring some of that old enthusiasm back into the bidding up of shares! $$$$$$. Let's see what happens this week as options are out of the way. Earnings may provide the extra push we need for a little while....
Best Regards
Standards
GE looking good today
Good luck
Hi Saleem,
I am still learning technicals. Coppock is an indicator that I recently was introduced too. According to Coppock this is the second greatest buying opportunity in the history of the market.
Diane
Hi Diane,
Nice to see your note..hope you are doing well in all aspect of life.
Can you explain what Coppock is?
Even GS is saying..we are going lot HIGHER...$$$
Learning never stops on Wall street..more you learn..the better your results.
Saleem
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