About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, October 21, 2011

Stock Market -- Daily Chart

Back on 10/3 (below) I mentioned that the market was deeply oversold and that a shorter run
bottom was close at hand. The closing low came on 10/5 at SPX 1131. Today the SPX closed
at 1238. That's a nice 9.5% move up on a lucky call (Lucky beats smart). The SPX is now at a
5.2% premium to the 25 day m/a. That is the strongest price momentum short term overbought
since early Aug. 2009. The good news is that strong momentum overboughts of this magnitude
are far more common with bull runs rather than bear. The bad news is that the SPX is still
significantly overbought in the short term so that a degree of consolidation / retrenchment could
be in order fairly soon.

The market has entered what is called a broadening top formation -- higher closing highs, lower
closing lows. This has a number of technicians nervous because formations of this sort can end
badly with a new low or even a major breakdown. I am not a big "formations" guy because I
have seen so many of them busted over the years, but it is there and you should know about it
and you should also know that there are bears out there who rely on formations like this but
do not tell you so because such elucidation can be regarded as flaky. (The formation started in
early Aug.)


No comments: