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January 4, 2008 Sunday Evening
The world markets are moving up tonight starting with Asia after last week’s nice run upward as well. There is naturally some tentativeness about what will happen this week and this cautiousness could also help add to rising stock prices. This week is when all players come back into the market after holiday vacations.
There are some indicators that are starting to show we have a short term top. Let’s look at the T2108 on Worden Brothers daily chart. This shows that 83% of stocks are now over the 40 day moving average. This is the highest reading since December 2006. This isn’t a perfect predictive indicator but it is worth taking note.
The VIX, Volatility index went under 37 on Friday and has come down directly from 81 set on that November 20, 2008 when the last big and obvious bottom set on November 21st. This daily chart looks like a rebound is in order, which would result in stocks pulling back for a few days.
So you have some decisions to make about what to do with your long portfolio in the next day or two. The challenge is whether you hold your long intermediate positions through a shallow pullback that this will likely be. For the short term oriented investor, the next couple of days may be a good time to take the profits that you should have from buying this last 3-5 trading days. There is also an old saying in trading and investing that you hold your long positions until there is a clear indication that the stock is reversing against you.
My own personal orientation tends to be biased toward anticipating what the indicators are saying and re-purchase after the several days of pullback that we could see starting this week. But that takes more discipline, work and organization with your trading.
In a normal year, January is usually quite a bullish month and this year it could be more bullish than normal after the big sell-off we have seen the last three months. So we have a push and pull of forces, (as usual) to weigh on our decisions. It is a time to really control your emotions of fear and greed. Greed may influence your decision to "go for it" and see if the January effect brings prices higher without a big pullback or the opposite extreme is to let your fear keep you out of the market altogether.
Take note that oil has moved from $35.69 a barrel to $46.58 in the last 5 trading days so our oil picks have done well along with most all of the stocks on this table below. These large oil companies’ charts look like there is quite a bit more left on the upside. I would expect some pullback in oil prices for a few days and the stock market has been linked in parallel with oil prices.
A couple of other factors that will influence the stock market are the stimulus plan Obama plans to unveil late this month. That is likely to be one of the biggest factors that influence stocks these first 3-4 months of 2009. Also remember that the tremendous amount of money that the Treasury has pumped into the system is likely to help in the short term but in the long term, will likely cause some sort of inflation.
Intermediate Trade Positions: New ideas: FRPT, Force Protection. Late to this idea but it has recently made new highs and indicators are positive. Worth small position.
HOTT, Hot Topic Apparel should be considered on a pullback. Set alarms to watch this stock for a long intermediate trade.
AGU, Agrium is the first of the ag-chemical companies that are starting to look like a bull run could be starting.
Swing Trades: New ideas: none.
Day Traders/Intraday stock ideas: FSLR, First Solar….. AAPL, Apple Computer, should be watched tomorrow for the pattern of trading action that may give intraday profits. Intraday trading could be less profitable and more distracting in this market environment. Stocks are probably going to gap up a little and have less obvious bottoms that what we have seen these past months.
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