The Rain in Spain
By Todd Harrison Mar 15, 2004 8:51 am
Old habits are hard to break!
Good morning and welcome back to the full court press. With Friday's rebound from the week long bear pound, an angry young bull picked himself off the ground. "You might knock me down and you may drag me out," said Hoofs (his tone was more of a shout) "but I'll tell you this and I have little doubt, when I've done my thing it's the bears who will pout!" Will he get on track and edge back to the black or is Boo's furry ambush now set to attack? It's a spankin' new week in the minxy boutique so let's settle in for our critter critique!
It's been a long time since Hoofy's been down or chilled in the 'Ville sportin' a frown. Throughout last year's snazzy jazz, there was nary a blip during the upside skip. As a function of those steady gains, most bears were driven back to Red Dye Junction for a refresher course in humility. And while keen observers picked up some subtle paw prints in February (via lower highs and negative divergences), Boo has been conspicuous in his absence. That is, of course, until he arrived last week and forcefully stomped onto center stage.
The great debate this morning is focused on whether the recent crimson tide will soon wave goodbye. The bulls, emboldened by an unprecedented back-to-back-to back north of a deuce TRIN readings, bounced Friday with the hopes that a quiet weekend would usher in a green Monday. What they (along with the rest of the world) failed or to anticipate was the unexpected Socialist victory in the Spain (and the direct link to the Madrid bombings last week). Aside from the obvious near-term ramifications on the war with terror (the Prime Minister-elect vowed to recall Spain's troops from Iraq), it plants a disturbing seed as we edge ever-closer to the stateside elections.
Be that as it may (and it warrants particular attention in our current psychology bubble), most market observers seem to believe that further upside is in order. Snoop Tone weighed in this morning to note that the percentage of oversold readings in the OEX (59%) and NDX (76%) dwarfs the overbought components (4% and 5% respectively). These type of readings were found in late September and preceded a solid bounce. That, along with (imminent) stochastic buy signals, is the bullish fight song as we edge through this March madness.
There's no denying that there's room to rally in the major indices . The NDX could lift to 1460 and still be in a defined downtrend. The DJIA could rally to 10,400 before hitting its keppe on the former floor (and newfound ceiling). The question, obviously, is whether the Minx will follow the script and behave accordingly. Remember, Minyans, she broke alotta rules on the way up and folks, by and large, are uniform in their view of higher prices still.
That's about it from the trading ship as we edge into a fresh week of muck. There are a ton of crosscurrents out there and the world is a bit dicier than it was a week ago. Assimilate your trading metrics and formulate a strategy that assigns adequate probability for all outcomes and allows for a margin of error. Nobody said it was gonna be easy but with a little luck, a lot of discipline and a lucid approach, we'll find our way to the other side. One step at a time.
Good luck today.
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