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Back In The Saddle Again ! (?) March 10, 2012

Posted by Tom in Thoughts.
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Well now, that was quick !  I mean the “correction”.  It’s very easy to think that we’re all done with that nasty threat, or are we?  Are we “Back in the Saddle Again” or a “Range Rider” ?  Let’s take a look at the NASDAQ Composite Index below:

chart by MetaStock / Equis International; used with permission

The last 2 days of the week were a dramatic recovery and that’s a beautiful thing.  But we’re still not quite back to the previous high (at about 3000) and . . . volume was really not that impressive (downward sloping red line), especially when the most impressive volume (blue arrow) was a big down day.  Are buyers rushing back in?  Not yet.

I’m not “downing” this recent rally, just a little skeptical right now.  I would have preferred to see the two up days with decent volume and/or I’ll need to see a sustained break above the recent highs.  Those may very well happen early next week so we shouldn’t have to wait long.

What is positive is the general world economy.  The US is making a steady, slow recovery.  The powers that be in Europe are doing their best to find and work through a solution to the debt issues, tho there still is much in doubt in the long-term.  We can see “easy money” being made available by governments around the world and that money needs a home.  I ask you:  IF you were a banker and could get all the money you wanted at (near) 0% interest . . .  would you loan it out at say 5% per year or place it into the markets and get that in a week or two?  Nuff said.

Bottomline is I still doubt that any corrections over the next year or two will be big unless the un-expected happens.  The markets have already priced in the expected, tho there will likely be some engineered declines so the smart money can re-load their positions for the next run up.  That being the case, watch for both price and volume rising in unison; that’s a very positive sign, as is price falling on light volume (in this environment, not always).  Prices falling on high volume should get our concerns up.

Looking at the broader sectors, I see Japan, Technology, Consumer Services, Banks (US), Telecom and Consumer Goods (retail) holding strong.  I’ll be watching next week how the indexes react to previous high’s.  Will they bounce off and head lower, or just blow right through them?  It should be fun to watch.  My (total) guess is that we break above, followed by a scary drop back down to near that level and then a clear break above on higher volume.  Then . . . we’ll be “Back in the Saddle Again” and not riding in a new trading range.

Have a Good Week and feel free to post comments by clicking in the “comment” section above in the posting.

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