Market Ready For Upward Departure?
This market sentiment comes via Ravi Menghani who is a medical student at UCLA.
Ravi writes:
Over the long weekend I had an opportunity to browse the indices’ charts, and in my opinion, there is much to be gained on the upside.
Very briefly, retail numbers are showing strong. As Dr. Jack as mentioned many times, much of the retail sector is oversold and PE’s are approaching historic lows.
Taking a look at the S&P Chart (attached), we see that a major support level, the 80-week moving average is serving as immediate support. We’ve bounced off this level since early 2005, and I think odds are it will continue to hold, given that we have sold off about 10% from highs.
The Dow and the Nasdaq (see attached charts) are nearing critical supports. The Nasdaq’s support is the 200dma, which seems to be holding, and the Dow is nearing the August lows…on a closing basis (not on an intraday basis).
Combine this with the fact that some banking stocks like WM are looking like bargains as are retail stocks (JCP, WM, etc.), and the “holiday” factor (urban myth holds that after a holiday bias reverses from bearish to bullish and vice-versa), and I think we have a good chance for a “melt up” into the new year.
I hate standing on the fence, so I’m going to place myself solidly into the bullish camp.
Obviously, if Goldman Sachs comes out and writes down $20 billion, we could go lower, but other than that, I think we’re going up.
Just checked: Asian markets and US Futures are green.
Prepare for departure.
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Ravi, good job on the technical outlook.
According to several research reports, it appears that foot traffic on Black Friday for this year increased slightly compared to that of last year. The National Retail Foundation’s (NFR) stated that there was an increase of 4.8% from last year. However, the average consumer had spent about 3.5% less than the previous year, an estimated $347.44/person.
I wouldn’t give the above numbers much merit. There is much more to be considered and tallied to render a more sufficient outlook on the strength of the holiday consumer spending. But, let me add, there are opportunities galore in the retail sector worth examining. This remains a “stock-specific” market! Amongst the names I like are the following: JCP, M, KSS, LTD, and AEO.
As to the technicals, 12850 for the DOW is critical. We will revisit this level very soon, though tomorrow might close higher. I began a new short pyramid on DIA as of last Friday at 129.58. My last pyramid stemmed from 127.50 to 141.75. I covered that entire pyramid with huge success, though times were painful. Tomorrow, I plan on shorting the peak on DIA, adding further to the 129.58 pyramid.