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MV Weather Report: S&P Forecast Mimics 2003?


Rain or shine, we review the day's biggest stock stories.

Today was a quiet day in the markets, however a winning one on Wall Street, as the S&P 500 approached new highs. The index closed the day higher by 0.78% closing at 1033, just off today's high of 1036 and the year high of 1039.

The failure of the "bear market rally" to cease is beginning to frustrate the bears. Today on the Buzz and Banter, Professor Kevin Depew gave his thoughts, looking into the S&P 500 now and that of 2003 when observing at Point and Figure analysis and DeMark indicators.

"One of the harshest lessons I learned in financial markets was in 2003 when the bullish percents turned up in March and early April from very low levels. Then, as now, the calls were that it was going to be a short-lived "relief rally" from exhaustion levels and that soon the inevitable bear market would return. Four years later, that view proved accurate. Four years.

"Meanwhile, the summer of 2003 was brutal. The rally was relentless. The NYSE Bullish Percent ran from 38% in April 2003 to 86% by January 2004 without pause. It had reached the "red zone" area of 70% by June. Throughout the rest of the summer the rally continued to run ahead "on its last legs", "on fumes", "due for a pause soon."

"The bullish percents, remaining positive throughout that rally, should have kept me in the market, but I second-guessed them because I knew the fundamental case was terrible and there was no way to restart the credit engine. It's very similar to now.

"So, the bottom line is that the bullish indexes, having been positive this time since July after a brief turn down, and having moved from 20% in March when the reversed up to 78% now, are telling us that buying momentum is strong enough to keep moving stocks forward, generating buy signals in point and figure terms. Eventually, that buying power will be exhausted, and it appears that will likely coincide with DeMark exhaustion points being reached across the multiple time frames."

I feel Kevin did an excellent job of capturing the current psychology of the market. Since the middle of this summer, the bears having been calling this move a "once in a lifetime bear market rally." It really seems like the bears are saying the same thing they said during the summer of 2003. So I'm thinking why can't the market rally into the end of the year just like it did in 2003?

Just because the markets still in a bullish position, it doesn't mean there aren't any bearish set ups. On today's Buzz and Banter Professor Smita Sadana gave some names showing negative patterns.

"I got an email inquiring about current non-confirming stocks. Here is a short list of some important names:

"Google (GOOG) (as I said yesterday), IBM (IBM), Bank of America (BAC), Citigroup (C), Research in Motion (RIMM), Amazon (AMZN), Microsoft (MSFT).

"In terms of sectors, the #1 dissident as of right now is BKX."

That's all for tonight, have a great one!
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