Mark Fichera currently uses skills learned over the past 40 years to provide investment ideas based primarily on technical analysis. He is particularly well versed in point and figure charting, trend line charts, Japanese candlestick complimented by various technical indicators and...
Doesn't this rally remind you of the "Little Engine That Could?" We are 23 weeks from the June 13 lows for the DOW, S&P 500 and NASDAQ. A brief 5% rally led to a successful mid-July retest of the initial June bottom and then the rally slowly began to build. The gains to date, range from 15% for the DOW Industrials to 19% for the NASDAQ. It has been a plodding, but consistent move surprising a Wall Street crowd looking for a mid-term election year decline. September and October, historically "the worst two months of the year, " generated the strongest market gains. Today, one month from Christmas, we are still ringing up new highs. But that's history. What lies ahead?
The crowd's reluctance to buy-in to this rally has been a major factor in its longevity. Each move higher was met with doubt, not enthusiasm. This was most evident in options trading on the Chicago Board (CBOE). Instead of buying calls with visions of a higher market, the options traders bought a disproportionate number of puts, betting against the rally. This trend has ebbed over the past few weeks. Combine this with an overbought condition, and you have a market that is ripe for a move down within the next day or two.
How far down do we go? Only the Shadow knows for sure! But given the underlying strength of this rally (market breadth), I suspect a 3-5% correction will encourage impatient buyers to buy the "next dip." Let's not forget that we have entered the November through April time period and the market historically performs better during this season. This is not a secret! Traders should look for disciplined buying opportunities. Long-term investors, wait for a more significant sell-off. Remember, this "bull "market began approximately 4 years ago! Caution and discipline are important here, even though I believe we will see higher highs in the popular averages before this bull phase ends.
Precious metals remain in a long-term bull market that began circa 2001. That marked the end of a previous 20 year bear cycle for the metals. The easiest way to broadly follow the group is via the XAU Index. The XAU has been building a base between the mid-120's and 142 since June. The previous rally peaked at 170 in May, before dropping to the 120's. Gold, currently between $625 and $630 per ounce, appears poised to rally back to the $700 area. Initial resistance exists at $ 650 on the chart (see chart below). Dollar weakness and relatively low interest rates favor a positive move for the yellow metal. And if you like gold, you have to like silver even more. Leverage favors the white metal.
My name is Mark Fichera (pen name - "Big Fish " ) and I will be communicating with you monthly with a read on the market. I will attempt to refrain from predicting the "long term", leaving that to others and the weather man! Each month, we are going to take the temperature of the market and find current trading or investment opportunities.
The opinions and commentary provided by the advisors in the My Automated Advisor Newsletter are the opinion of those advisors and not of My Automated Advisor.
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