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08-Feb-09
Weekly review 2-8-09
So we had a pretty bullish week, very stimulus-related crap going on that spiked up the market, and induced money flow as well.
But the Q's are not showing much bullish sentiment throughout this rally in other indicators such as cumulative McClellan divided by NDX, which barely spiked up and is still lower than early January's top. The percentage of stocks over 50MA is very high at the exhaustion level of 80% where it usually tops out. The Nasdaq bank index divided by implied volatility isn't spiking up which is driven by weakness in banks, obviously, but total volume did spike up significantly this week. As for the forks, we have significant resistance at current range and at the 32 to 33 range. So the naz has room to grow into extremely overbought levels and stretch it out to maybe high 32's to low 33's range or it can start tanking this week.
SPY is in a slightly more bullish scenario than the Q's. Cumulative McClellan divided by SPX is still lower than the early January top since these latest rallies have barely raised this indicator. % of stocks over 10D MA barely spiked up since early January despite this intense rally. % of stocks over 50D MA is pretty high at 60% but not at the exhaustion level of 80. All 3 Forks also cross at 90 but the bullish (upward trending) fork is now touching current price range at 86.50-87.00.
All this leads me to believe that there is still room for another stretch rally to 90-91 range.
As to strategy, its safe to start accumulating some short positions is weak stocks and sectors, or even plain ol' SPY/QQQQ/IWM .
I'm building a short position in AVB because it had a gap down on a downward trending channel and is underperforming SPY as of the last few weeks. Even though it already filled that gap, I think its just riding the momentum in the indexes and will start tanking once the indexes do.
As for weak sectors, XLI and XLB look weak but my favorite ETF to short is DVY - the dividend etf. Why short dividend stocks? its one of the weakest ETFs out there besides banks/financials:
One of the strongest stocks I've seen for a long play, besides all those break out set ups that are popping up lately, is PEG a very bullish utilities stock:
The only downside here is if there is some extreme selling pressure in the indexes that will break the green trend line, then it could be an unbelievable bargain at 22. Untill then its buy on the dip all the way up.
Posted at 13:30 in Market Report | Permalink | Top
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