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(very) Cautiously Optimistic October 4, 2013

Posted by Tom in Thoughts.
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This will be a short post as I’m very busy right now, so here goes . . . .

Take a look at the chart below.  I see higher Hi’s and higher Lo’s (price swings).  This type of “stair stepping” up is pretty darn healthy.  I’ve labeled a Buying Climax (bc, a minor one) and perhaps a Spring (spr) as a possible mini price structure, but in the grand scheme of things it’s really a climb up.

NASDAQ Index

Looking at the news on the domestic front it’s bad, plenty of reason for the “smart money” to sell off . . but they have not.  Could it be that they (and the market) know more than the political talking heads?  It sure looks like not many (as of now) are concerned about a lengthy shut down let alone a default.  This could change if things get out of control of the House Speaker and the Senate Leader, but as long as that does not happen, I think the market has been told “don’t worry, we won’t really do it!”.  And that’s what is showing the the market right now.

IF my scenario holds, then the low price of that tentative Spring bar should hold and that’s at 3734 on the NASDAQ Composite Index.  If that price should fail, especially on a Close, then my read out of the price structure collapses and we could very well head lower.  What I’m hearing from institutional folks is “We’re buying on dips”.  So far, that looks like it’s headed in that direction.

I’ve posted my monthly Client Report newsletter under the Newsletter tab.  In it you’ll find the top 10 (and bottom 10) sectors as well as what the broad market is doing with Price Strength and Money Flow.  These generally support my scenario.  Take a look.

Don’t get over-confident but also don’t be scared to take a position.  Knowing when to buy is rarely easy and this is one of those situations.  Let’s hope that the folks in Washington work things out, and then we can get back to pure stock selection.

Take Care and Good Trading.              ………….  Tom  ……………

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