Stock Market
All comments and Stock Market Analysis are made by Guy Brumley. Guy has been trading the Stock Market daily since 1992.
Trading, evaluating stock prices and predictions
Stock Market Commentary 10-26-2009
The DOW had a mild decline for the week, and the current rally is experiencing some pressure. The DOW closed just below the 10000 level.
The weekly charts of the DOW and the S&P are struggling with resistance from the down trend line formed using the 2007 and 2008 highs. Couple this with the fact the Dollar index is about to bounce off support on the line drawn using the March and July lows of 2008.
Any sixth-grader would read this as a textbook time to sell equities. Since it is such an obvious sell, I would expect the market to do a head fake or two over the next week before pulling higher.
We are entering the “good” six month period for the market. The time from November to May has been the time when all the money has been made over the last 50 years. The recession is ending or over, and the next bad news should not appear until January, when 401k fundings fail to occur, and the next round of major bank failures will begin.
The IBD bull/bear ratio is 49% bullish to 23% bearish, which allows for another 10% on the bullish side and 5% on the bearish.
This week will provide further earnings data. The S&P 500 earnings are projected to be “less bad” down only 7.4% from year ago, but improving from down 18% second quarter, and down 39% first quarter.
The earnings outlook for 2010 is still down 16% from the high of 2006. Does that mean DOW 12000?
Therefore, with all the charts testing historic limits, the next week is a good place to sit back and observe. Let the market show a strong direction. For those that need to trade, I would expect higher numbers over the next month, so go long. But we could get a head fake down of 500 to 1000 points.
A few plays are ISRG, NTRI, EBIX, SXCI, MED, HMIN, BUCY, BIDU. The expensive ones (ISRG and BIDU) can be played using options.
I still like GLD use the GZC KX option.
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