The SPX advanced 39.83 points yesterday to close at 881.27. I originally had recommended that short term and daily traders go short, but I issued a special update at 8:45 a.m. canceling that recommendation because of the extraordinary pre-opening news. Therefore, as a result of that special message, TOT long term and short term investors remained long for the session, and TOT daily traders were on the sidelines for the session.
Since initiation of this service on September 30, 1993, our daily trader recommendations have gained 7163.21 cumulative SPX points compared to a gain of 422.34 points in the index itself over the same period.
The market has reached its short term objective in the 875-885 area, and it’s unlikely to move further ahead without a pullback first. The “EVERYBODY” commentary from Monday’s hotline is still very much a factor in the market, as there has been a massive sentiment switch with investors buying into the October, pre-election year mindset. It might work that way, but it’s just too pat. Also, there is an insufficient foundation under this advance, in my opinion, and based on my short term indicators. Within that context:
The super long term perspective for the stock market remains bearish.
The long term model remains bullish. However, Citigroup news and other favorable news notwithstanding, but with improved momentum shoring up the model, the short term model has downticked to neutral. Repeating, the short term model is now neutral.
Most of the market’s advance yesterday was short covering and massive program switching from bonds into stocks. The 30 year Treasury bond (which may not be the official benchmark but which I still consider significant) declined over 2 full points yesterday, and most of that money (and, I’d assume money from shorter bonds as well) moved into stocks. Up to down volume at 7:1 on the NYSE was excellent, but still not the stuff of bull market breakaways. Be very cautious.
The daily model is bearish today. With the negative news from Intel after the close, futures are down about 8 points, and it will be very significant to see if the market can shrug that off when morning trading begins. Unfortunately, I have to be out of the office for most of the trading day, so intraday updates will not be possible. I would expect the market to sell off on the opening, rally smartly (which will encourage people into believing that this is a new bull market capable of shrugging off bad news), but then my best guess is that it will sell off. If it doesn’t, that would be quite bullish. Because of my travel plans, I’m going to officially stand aside today, but look for the pattern I just described, and if you see it developing, do try to take advantage of it.
Thanks for the opportunity to be of service to you, and I’ll email you again at an appropriate time sometime during today’s trading session.
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