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All I can to do in this limited amount of space is breifly describe what I see in the market or a stock at a given point in time
Outlooks or projections are purely speculative and can change materially at any time and without notice
Nothing presented here is intended to be given as investment advice
If you use any information presented here, you do so at your own risk

Friday, December 4, 2009

A Maturing 3-legged Bull

Geez, I just realized it has been almost a month since my last post here. I have been actively trading and most of my updates are done on my Public List at Stockcharts.com and during the day on CiL. Charts have done a great job of pointing to a top soon, but indicators can point to a top for months before even a healthy 10-20% correction. Keeping abreast of developments in the markets regarding sovereign debt to earnings announcements by market leaders is an overwhelming job for the individual trader but is it also important to keep in mind how bull markets behave and transition into the various phases. The market is entering a new phase which is characterized by longer periods between the usual 5-7% corrections, lighter volume, and wide swings within ascending ranges ( 2-3 week sideways, tight bases etc ). Stocks go into long periods being overvalued and less time being undervalued.
The one thing going on now is whether the market truly believes that the bubble will stay re-inflated after all the liquidity that has been provided. The market will get a higher multiple associated with it if in fact it feels that it is deserved and that alone will push prices higher into 2010, albeit at a slower pace. This push higher does not mean the market will hold that higher multiple, but with unemployment and the usual LEIs pointing to a recovery of some degree, the market will rise until just prior to the next major correction that will be brought on by a disruption in credit markets or a geopolitical event or something totally surprising. For now, the market seems satisfied with the movement in the US dollar and feels comfortable with it moving up off the lows lately since it is probably convinced that the rise will not be high enough to hurt equities negatively. Crossing and holding above the 1107 level in the S&P500 represents the market's confidence and willingness to take on risk. Bonds are beginning to sell off recently again and have probably seen the highs for a long time to come. This is just another sign that things are going back to "normal" (if we can call it that).
My short term projection is that somehow the market makes it to those 160 month simple and 200 week exponential moving averages around 1150 by Jan. 2010. After that, I am confident that there will be some sort of larger correction on the back of some crises in sovereign debts, currency, or other unforeseen incident.

Before you sell your gold or trying shorting it, it would behoove you to study this long term chart for $USD first! I will elaborate on it later.

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