The international news is crazy. There was an international bailout of Greece, including cutting the value of Greek debt in half. The market rallied. Then Greek Prime Minister Papandreou called for a popular vote on the new measure. The market fell. Papandreou changed his mind and removed the popular vote. The market rallied. Italian bond yields rose above 7%. The market fell. Italian Prime Minister Berlusconi resigned. The market rallied.
The news headlines are erratic, but the market's chart pattern is not. An S&P 500 chart shows a downtrend followed by a sideways basing period that lasted 2 1/2 months. The base was decisively broken to the upside in late-October followed by a retest of the breakout in early November. Thus far the retest is successful. This is a textbook trend reversal pattern. Astonishingly enough, I find most technicians are bearish.
The best news is the strength of our "stocks only" Advance Decline Line. Since October 27 the S&P 500 has made a series of lower highs. At the same time the Advance Decline Line (shown above) is making higher highs. In fact, the Advance Decline Line is at a multi-month high right now. Stocks are stronger than what the major averages are implying.
Bottom Line: Negative news dominates the headlines and the market is volatile. Yet when one steps back and simply looks at the chart the picture is increasingly bullish.
David Vomund
Past performance does not guarantee future results. Consult a financial professional before purchasing a security.
No comments:
Post a Comment