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Sunday, November 14, 2004
Market Recap
The stock market has been a freight train and it seems nothing will stop it from having a year end rally. It continues to forge ahead making steady gains - even higher interest rates and a falling dollar cannot get in its way. The catalyst Friday was more positive economic data, and a good earnings report from DELL. The retail sales report and the consumer confidence numbers released on Friday morning were both very good, and Dell Computer released earnings on Thursday after the bell. Dell's stock reacted positively to that report gaining 8% on 75 million shares on Friday. This is a huge move for this big cap stock and huge for the market and tech sector. DELL is now at a three year high closing above $40. The Dow gained +69 points Friday and closed the week above 10500, a six month high for this index. The NASDAQ gained +24 points and closed up for the fourth week in a row, ending the week at a nine month high of 2085. The S&P is leading this bull run, gaining +18 points Friday and closing at a new three year high.
A New Three Year High
That's right folks. When the S&P closes at a new three year high, it is safe to assume the bull market has returned. If you are not long now, you will be left behind. Charts are looking better than they have in the last 4 to 5 years, and we have been doing some heavy buying, loading up the portfolio with 25 open long positions. With only 5% of our portfolio balance in each trade, we can only have 20 open trades, so each position over 20 puts us on margin. We will only use margin when we think the market is going higher.
Stock and Awe
Stocks are going up as terrorists go down. We are winning the fight in Fallujah and the market likes this. There will be more Fallujah's and we will win them as well. With Arafat now out of the way, that should be a big step towards peace in the Middle East and the market likes this as well. This is a time to be long but with caution. Do not just buy anything and everything. There will be plenty of opportunities to buy stocks with good charts as they pull back to their support levels. Even a bull has to rest sometime. Bull markets will have corrections and those are the times we should be buying or adding to our positions. There are many positive signs in the market, but be advised that there has been a tremendous run-up over the last three weeks. The Dow is up over 700 points since Oct 23rd. It was down to 9750 then and coincidently, oil made a record closing high on Oct 22nd. After that closing high, oil started its downward plunge and the Dow started its big rally. Oil is down 14% during the Dow's 700 point rally.
Post Election Rally Continues
I am bullish because of all the great charts, but in the back of my mind, I know we can expect a pullback. This run has been a good one and the market is now over bought so a rest is due soon. Also, there is still some negative news out there that historically has not been good for the stock market. This negative news is the rising interest rates and the falling dollar. With the dollar falling like a rock, the stock market should not be going up like it has been, it is defying logic. Normally, a falling dollar hurts stocks but in this case, I think the rally is more of the post election rally we expected. There was a lot of cash on the sidelines and now that the election is final, all that cash must be put to work. It could also be a massive amount of short covering as well. The market was heavily shorted and a lot of buying to cover has to take place.
Tug of War
Right now, the market is in a tug of war between geopolitical events, oil falling, rates rising, dollar falling, good earnings news, good jobs report, and good consumer confidence numbers. It is a mixed bag of information that the market is attempting to digest. All this news is causing some wild swings in the market. Lately, it has been more good news than bad, coupled with the seasonality factor of the pre holiday run-up that is causing the market to rally. I look for continued higher stock prices for the remainder of the year with some occasional pullbacks. These pullbacks will be excellent chances to accumulate stocks.
Ignore the Media
Oil reached a closing high of $55.17 on Oct 22nd just after an article we spotted and listed here. We warned that when the talking heads start pumping certain stocks and commodities, it is time to do the opposite of what they are saying to do. We have seen this time and time again, and this article is yet more proof that we can do much better trading if we ignore the media or do the opposite of what is being pumped at the particular time. Now with the charts looking better than they have in years, there are some media outlets telling us it is time to be in the market. I am always skeptical when I see people starting to get bullish; the market never does what the majority think it should. The good news is, there are still some media outlets saying the market cannot go higher under the current conditions I mentioned above (falling dollar, rising interest rates). Let's hope these people keep that stance, after all, someone has to be wrong. Let's hope these bears do not become bullish. If and when they do, we will know it is time to sell.
Bulletin Note
Stocks with * in the remarks column are usually removed the next day. Today, I removed three stocks that did not have an * on Friday. This is because we needed to make room for faster movers. There are so many charts looking good right now that we may have to remove some charts that still look good, this happens in Bull markets. We have removed CRM, MPE and OMM. These charts still look great but we must make room for faster movers. The Bulletin is limited to 50 stocks so for every stock added, one must be removed.
OTC BB Watch List
- UNWR
- AHOM
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