Where is the Dow & others heading in 2005?

[roguetrader]

I was reading wallstreet courier and these guys are putting in a good 'technical' argument for a bull trap. They say:

Here are some more reasons why we believe that this breakout was most likely a short squeeze and not the beginning of a long and substantial up move:

The volume at the breakout was not very heavy

The bulls have now wiped out the short sellers as we predicted and this will probably take a lot of steam out of the market

Oil is not far from its all-time high of $55,67 per barrel it reached in late October and it could rise further

Investors Intelligence and Market Vane shows market newsletter writers to be more bullish today than they were at the giddy heights five years ago

The Vix is still at historically low levels, indicating complacency among investors

The Dow reached a 3-1/2 year high but the number of new highs is lagging badly compared to the Dow's previous high in January and February 2004 (Charts of Interest)

Public short sales (dumb money) fell to very low levels recently

Short selling by NYSE members and NYSE specialists (smart money) is rising rapidly


They seem like good arguments. Lets see how the situation develops. Friday’s movement is obviously telling us to BUY, buy, buy and then buy a little bit more. The funny thing is the volume isn't supporting this notion. Normally you would have to agree and think that when this type of activity occurs we normally would be approaching market tops.

I also know a lot of members trade intra-day and therefore your positions and stances on the market change much more frequently then medium to longer-term investors. This breakout is showing on medium to longer term charts and now basically everyone is being told to buy no matter what term you trade on. Intraday traders catch daily moves therefore they change directions rapidly. The medium and longer term traders who bought on Friday in terms of a breakout should be aware of what could happen as they hold positions longer and can get burnt more then intraday traders.

If you look at other charts or indicators such as Smart Money Flow Index, Investors Intelligence and Market Vane, Public short sales (dumb money), VIX, NYSE members action and NYSE specialists (smart money) they are all showing a bearish view.

I believe greatly that my money or even your money does not control markets. It is controlled by institutional money, big money. This post is just some ‘friendly’ advice to members as most of us are very small compared to institutional power. Oh and while the small guy might be buying they are now selling.

Also I urge members to listen to Tim Wood on:

http://www.netcastdaily.com/broadcast/fsn2005-0305-1.ram

or

http://www.netcastdaily.com/broadcast/fsn2005-0305-1.asx


Thank you.

Interesting stuff user, featured tech analyst Michael Khan on Barrons makes some similar observations, he also appears to believe the stage is set for future declines, but that the short term could see more upside. In the latter case he cites the markets spirited recovery from the early year sell-off, breakouts in the S&P 600 and the NYSE Comp, and S&P 400 mid-caps, and the strong advance/decline in the broad market suggesting that it is not ready to roll over yet.
My personal belief fwiw, is that despite the apparent overwhelming bullish sentiment, the lack of volume on Friday shows us that all is not as it seems, there may be a lot of "talk the talk" on the bullish side but people were not willing to put their money into "walking the walk" Until that changes I don't see a top. But that's just my thought.
Back to Mr Kahn, on the longer term bearish side he points out the lack of participation by the tech market. I myself believe that for any healthy rally tech should lead, or buyer beware. Similarly he also points to the lack of participation of the financial sector, in particular the indifferencce of banking to recent rallies, and points out that few rallies will go far without the financials. So I guess that leaves us in stalking mode.
Good trading.

 

[peterpr]

Much talk of volume in earlier posts.

Not convinced its telling us much though. Volume has declined more or less throughout the rise from the big decline day on 22nd, but not dramatically.

The thing is - if we teally are approaching the major top called by may Elliotician's (and I mean 'Grand super cycle', 'super cycle' and all smaller degrees), then it probably ought to be signalled by price and volume spikes - or at least surges.

The way things look volume-wise right now argues more for trend continuation/sideways movement. ie. more choppy u/d movement rather than a continuing rush up. - that's on a week or so view anyway - IMHO.

The biggest single factor is that break above 10860. That was pretty fierce resistance so any consolidation above it and I agree we will probably see at least a couple of hundred points more upside - still very cautious though.

 

[Strategic Trader]

the dow will definetly either go up, down or sideways - and the only professionals who claim to know, are analysts and not traders

 

[User]

roguetrader, I feel 'Short term' we see higher price action but I feel it will be short lived. Should watch out for the downward move that could occur similar to 99-00.

I see some analysts and traders are calling for 13,000. Well lets just hit 11,000 first.

May I say I am happy with the arguments for upside and downside action that is being posted on this thread. Nice interpretations.

 

[Preacher-Man]

I see some analysts and traders are calling for 13,000. Well lets just hit 11,000 first.

Wise words User... couldn't agree more. How d'ya eat an elephant...?... One bite at a time...!

 

[User]

Long at 10933. The low of the day, nice result so far!

I'm wondering if I should put in a limit stop at around 10980 or 90 or 11,000?

 

[FetteredChinos]

user.. i would put your limit just beyond the 11,000 mark...

dont think we will hit it today, but if we do, it could be down into wednesday.

currently looking for a place for a FTSE short as well. 5080 looks like a good spot for me...

 

[FetteredChinos]

think today might be a bit of a messy sideways day, IMHO..

unless we spike up to my 11,100 level

interesting to see what happens when we hit 11,000

 

[sumathik]

now that every one is expecting the 11000 mark is'nt it obvious the market can turn down and trap the late bulls above 10950.
for me 11021 is the next stop but 10950 will be a good resistance to get through. 11388 we will some time this year. trading range will be 10100---11400.

 

[roguetrader]

Mid-quarter updates this week from INTC and TXN may shed light on where SOX goes from here.

 

[peterpr]

the dow will definetly either go up, down or sideways - and the only professionals who claim to know, are analysts and not traders

There are plenty of 'professional analysists' on this site in the sense that their livelihoods depend upon the quality of their analyses - and they don't 'claim to know' either. Anyone who does so claim is advertising his/her naivety. We are all in the business of assessing probabilities based on a multitude of factors and sharing our thinking.

Not quite sure what your little missive is intended to contribute other than to state the blindingly obvious - and give 'analysts' rather more credit than they would claim for themselves.

 

[User]

Looking at the last 100 years or so. Bull markets tend to last on average around 27months. Well now we are at 27month. Another way of knowing that we are at the end is when the leading sectors change. I.e. from financials to Energy.

Very interesting to see 11,000. I think we could race through it touch 11,100 and that would give traders the impression that the skys the limit. Then we'll starting heading lower in dramatic fashion.

Looking back at stats, March is normally a flat month with increased volatility. Very mixed and the last few years we have had big swings.

 

[FetteredChinos]

dont analysts essentially base their decisions on TA?

eg if we are near support, they will give an upgrade, and vice versa if we are near resistance.

sulf-fulfilling prophecies?

 

[User]

Originally Posted by Strategic Trader
the dow will definetly either go up, down or sideways - and the only professionals who claim to know, are analysts and not traders.

If traders do not know then how do they trade? Didn't really understand your quote.

 

[FetteredChinos]

soxx already up 1.2% today... now will it follow through and take the Dow thru 11,000 with gusto?

 

[kriesau]

soxx already up 1.2% today... now will it follow through and take the Dow thru 11,000 with gusto?

Nasdaq 100 already up 1.2% in the first half hour. Rising techs tend to support a Dow upside.

 

[Preacher-Man]

Long at 10933. The low of the day, nice result so far!

Good going User! [ I'm standing at my desk as a mark of respect ]
You caught it... I missed it (looking elsewhere). Aiming to get in at the next pull-back to around the 10940 level... (not looking likely)
Good luck to you. BTW (re your 'stops' question) I'd just trail a close stop and let it run (I don't use limit stops).

 

[User]

Nasdaq up over a 1% thats a strong sign!

 

[User]

I don't normally use limit stops either. However its not everyday we approach 11,000.

 

[peterpr]

"Nasdaq up - SOXX up etc"

Careful though VIX also up nearly 4% - options writers perceiving lots more volatility = risk and all that.