A Stock Pickers Market

This is the case now more than at anytime since March. Also I will be doing some more sector vs market analysis comparing the present with the 2003-2004 bull market. Some Gann theorists are expecting 1150 to be the high of the year, while others still expect more upside. I am in the camp that it is not cut and dried and impossible at this point to know for sure what will unfold for the rest of 2010. But I also think that by March the outlook will be much clearer and thus, my focus will be on measuring the strength of the market technically and fundamentally.

ACAS vs DJUSFN

Live link to chart above

I am sure you have seen a chart of the Dow Jones Industrial Average since 1900 thinking that the market is in a similar time as 1929, and that the final lows are not in yet for the major indices. (In case you haven't seen any long term historical charts of the major indices, try going to StocksCharts * com website and look for the link "Historical Charts" on the right side of the webpage) While that is possible, it would seem more likely that the next few years or more will be similar to the 1066-1082 time frame due to lack of sufficient natural resources of all sorts, and limited capacity to lend by financial institutions. We have already seen a major downsizing of the major corporations of the world in preparation for an extended period of slow growth. So, until they start to make preparations to expand back to the levels they were at in 2007, then I think it is reasonable to expect an extended range bound market for the foreseeable future.

Also, many will be pointing out a massive H&S top forming in the $INDU when it returns back to 11,000 in 2011 while at the same time others will be calling for a rebound back to 14,000. So where will all the sideline money find a home for the short term? I expect more will flow into the large caps again, mainly the Dow and the larger ones in the S&P, the S&P 100.

Next 2 FOMC meets are the most important of them all

It has been a while since i posted here, but still updating charts on the public list at StockCharts.com
I have been focusing on individual stocks more than the indices, since the markets are moving at a snail's pace these days.

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Its your money!

These year end rallies are always good times to reassess financial goals since markets are at a peak very often around then. A look at the long term charts will show that at some point the markets always come back to face reality and fall back to a long term moving average ( the 200 sma usually ).



Live link to the chart above

I've been thinking real hard about whether S&P500 can get over 1120 to 1140-50 by Jan-Mar 2010 and how the Leading Economic Indicators and valuation will play out along with the other headwinds coming in 2010. Also the S&P is still well above 200 day sma and 2011 earnings will probably not be a lot higher than 2010 with the possibility of downward revisions around this next earnings season for Q4. The market will need to be quite convinced that valuation, LEI's, and earnings estimates are inline or it isnt headed over 1150 for sure. Hitting 1140-50 is still on the table, but I figure that at 1110, the market is within 3-5% of any gains that will be made over the next 4 months. It will depend on how S&P holds this 1084-1113 range in early Decemeber but with $USD clearly headed up toward 77-80 (maybe as high as 80-82) it will be tough row to hoe getting there by Jan (not to mention the geo-political front and all the indicators pointing to a top likely being in here). It is quite possible to test those Oct/Nov lows before it breaks over 1120. Prudence tells me to sit back and let it come in before getting very bullish again. It could easily rally back up in Jan to 1120 only to fall back to 950-1000 in Mar-July 2010 2011 earnings not likely to be much higher than 2010 and LEIs all need to move up together, not just a few good jobs reports here and there. It takes all 4 moving up about the same time or we will see a double dip.

Wholesale Trade Report at 10am EST is lagging in that it reports data a month old, but the market is still looking for an improvement there. Last report was not so impressive so I expect today's high may coincide with its release. Also, if futures are only up on the back of a little $USD pull back today, then this rally today in stocks will be short lived. A little pullback in $USD before heading north again should be expected at this point sending S&P back to 1085 by next week or sooner IMHO. A key question raised in the Wholesale Trade Report is: Will sale grow and reduce inventories? This is what will spur business to restock shelves and boost production. IMO We are not there yet, and considering other factors, it is hard for me to see that happening soon, maybe before mid 2010.