There is more to the present rally .... - Voice of the People
October 24 2011 - 1:07PM
Zacks
Zacks highlights commentary from People and Picks Member
«TickerBandit».
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There is more to the present rally ....
.... but are we through the woods? The answer ... i think
is both yes and no :-) . A number of key metrics point
to the likelihood of a retest of the early october low. One
of these metrics is volatility ... while another is the lack
of double 9 to 1's on this rally ... another which is not unrelated
to the prior ... is the lack of participation of smaller cap
issues. For example, fully 30% of the Russell 2000 is trading
in the lower 25% of their respective yearly ranges and 9% in the
the lower 10%. Presently there are two issues trading in the
lower 25% of its yearly range for every issue trading in the upper
25% ... for the largest 3000 publicly traded companies.
I could name a few more broad market metrics ... but in
essence ... it would only be more of the same ...
OK. So the present situation is that it is sprinkling
while the sun is shining. Near term, the metrics support
continuation of the present rally. Divergence which was
present in the first week of August has since dissipated and the
extent to which it occurred did not breech the Bear Market
threshold. It continues to decline and is presently
forecasting the long-term average market returns over the next 6
months. A shorter term indicator of the same metric is
indicating above average returns over the next twenty days.
:-) ... that said, I think a good portion of the gains are
already in ... with the remainder ... bumpier and with more modest
gains.
The bright spot is Large caps which is consistent with the
forecast of continuation of bull market (new 52 week highs for the
indices). So the present forecast is mostly sunny with good chance
of rain by mid-November. Not the kind of rain which destroys
the crop, but the kind that nurtures the crop and provides
opportunity.
But naturally, I am going to be following the market's
progress. What I don't want to see happening is an early
weakening/reversal of small cap issues. There remains a small
probablity that bear market thresholds in divergence could be
present when this present rally rolls. If there is, the
subsequent selling would probably be harsh. The good
news is that the evidence presently supports very low likelihood
that Bear Market thresholds will be met. On the other hand,
there is also the possiblity that short term metrics remain strong
and no retest occurs.
Happy Trading, TB (Oh and Uhm .... I told you
so)
The most recent picks by «TickerBandit» are:
A buy rating on Lexmark International (LXK),
a buy rating on DaVita (DVA) and
a buy rating on SanDisk (SNDK).
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