The Markets ended up higher again today. The Dow was up +58 pts, the S&P +7, and the NASDAQ +21 and were up 3/4%, 1%, and 1% respectively. The volume was fairly light though. The NYSE traded 3.8 billion shares just before the market closed and the NASDAQ traded 1.5 billion shares. For a continued rally, we need increased buying ON expanding volume. Volume will be key next week so pay attention to volume.
From a technical perspective, many short term indicators have and are turning positive (these apply only to short term traders who watch the markets daily). The 14 Day Stochastic crossed above its 3 day moving average on both the NASDAQ and the NYSE.
Also, Selling Pressure is trending downward and the rate is increasing, while the Buying Power has remained somewhat strong as measured by Lowrys (see attached graph). The rate of change of the slope of the line (the 2nd derivative) is important. Notice Selling Pressure is going down at a steep angle while Buying Strength is turning upward also with a decent incline. These are both bullish signs. We need to pay close attention and watch for a reversal in the slopes of these lines. Selling Pressure and Buying Power are intermediate indicators measuring trends, and a change in directions of both Buying Strength and Selling Pressure will demonstrate the trend reversing and will give strong clues to the next bear market.
As I have stated before, earnings should be good, but after that, fundamentals of the global economy, deficits and debts of governments will begin to occupy peoples' minds. The US Congress is already talking about another stimulus plan (because the all the prior stimulus packages or bailouts worked so well). This will not bode well for longer term bonds but will be good for gold.
Have a good weekend and keep studying,
Dan Stewart CFA®
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