Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Winter wonderland? NOT!!!


I want to take the snowstorm in the Mid Atlantic and Northeast regions as a great lesson on the difference between perception and reality. As the various media outlets showed the images of a winter wonderland, many watched from afar dreaming of making snow angels, sledding and all around winter fun. WRONG!!! As much as I love to hang out with the kids and goof around, I spent from 7:30am yesterday morning until 6pm in the evening shoveling my driveway and then going to help car pool buddy Linda dig out. I am so sore that I can barely lift an uptick!

Speaking of uptick - that appears to be just what we are going to get this morning. With the news of a coming downgrading of the terrorism alert system, nothing happening (other than a blizzard) in the US and no imminent attack on Iraq, there is clearly some level of relief priced into the early futures. They are not up huge, but on top of a very strong close Friday, being up at all is saying something. Friday was an important day in that it cleared the slate. You can tell what the dominant sentiment is based upon how the market acts heading into a long weekend. If the shorts have been overly dominant in the days and weeks leading up to the holiday, many will cover to go home flat rather than risk giving it all back on a possible news item over a three-day weekend. The opposite happens if the market is spiking higher ahead of a long weekend. Traders are likely to sell and go home flat to avoid any giveback when trading reopens the next week.

Obviously, the shorts were the dominant force as the market surged in the last hour despite worries regarding terrorism and Iraq.

How long can the bounce last and is the recent low strong enough to generate a rally similar to prior significant countertrend rallies over the past three years? The simple answer for me is "I doubt it." Not one of the indicators that I use, public or private, suggests that the major equity indices are anywhere near where they were in any prior rally. Just as an example, the 10-day moving average of advancing to declining stocks on the NYSE was -700 or worse near the bottom last October. As of Friday's close, the reading was -374.

Not being near the prior extreme readings doesn't preclude a bounce; it simply means any bounce would likely be limited in terms of both price and time until the intermediate-term indicators get closer to extreme levels. As I suggested toward the end of last week, when the market is getting pressed selling may not be the right course of action. Remember, the news backdrop hasn't changed that dramatically since last Thursday from a fundamental, geo-political and intermediate-term technical standpoint so if stocks are bouncing because they are so oversold near-term, what happens when they are no longer oversold near-term?
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos