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 !!!

Sunday, September 05, 2010

Stock Market -- Short Ride In A Fast Machine

Back on Tues. I opined that a rally in September would fulfill one of
the market's favorite pastimes -- catching the greatest number of
folks flatfooted. Bingo! We get one, but this is a tricky move and has
more "fool ya" potential.

As mentioned on 8/31, a tradeworthy oversold was at hand and
stocks have swung quickly to a mild overbought. But the market
was unable to take out the April - early August downtrend line,
closing about on the line. You can expect some guys will sell out
early on 9/7, with that indiscretion as the basis. Secondly, even if
the market holds up next week, we may have to wait as long as a
week after to get full confirmation of a shorter term uptrend.
Finally, the trajectory of last week's shot upward is too rapid to
continue without a pullback.

My intermediate term momentum indicator -- an oscillator based
off the 40 week m/a -- has been an effective tool for charting
direction over the years. It can be slow to signal change,
but has the merit of whipsawing seldom. The smoothed value is
starting to base after an extended deciline, and means attention
should be paid to whether a long side opportunity might be
nearing. I also note that the 21 day TRIN and the weekly OEX
put / call ratio have been signaling a "sold out" market for
several months (the institutional players have, in sum, been
net call buyers, whereas they are traditionally net put buyers to
hedge out long positions).

As readers know, I played the July rally to the hilt, but I did not
think another opportunity would come along very fast, and if
last week's mini-rocket is the prelude to a nice upside move,
well that would be delightful.

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