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Fear & Greed Trader
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INDEPENDENT Financial Advisor / Professional Investor- with over 30 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice and Experience to produce Portfolios focused on achieving positive... More
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  • Market Update 10/26 9 comments
    Oct 26, 2013 5:02 PM | about stocks: SPY, QQQ

    Back on Sept 18th, I wrote about another Dow theory buy signal as the averages rallied in sync as they vaulted to new all time highs.

    http://seekingalpha.com/instablog/706857-fear-greedtrader/2236882-market-update-another-dow-theory-buy-signal

    That commentary included a daily chart of the S & P highlighting the previous two times the S & P broke to new highs. Each high resulted in a shallow pullback Once again when the averages reached new highs again on Sept 18th , the averages pulled back to the upward sloping trendline as predicted in that commentary. The chart below indicates that price action and now shows where we are today ..

    (click to enlarge)

    The daily chart now shows a fourth arrow indicating the latest upward move. New highs on the S & P, also the Russell 2000 and the Dow Transports, all in sync, except for the Dow 30.. I noted that divergence in my market update on Oct 19th.. & it is something to keep an eye on .

    It may be wise to maintain a cautious stance as we certainly could follow the pattern we saw in the previous highs and pull back from here ... S & P 1715- 1720 might be a place for support , with 1700 as a secondary stopping point..

    In addition all indicators that I follow are flashing an "overboughht" signal here. Lets get back to the negative divergence that was noted with the Dow 30 lagging here. We would need to see another 130 point rally from present levels in the Dow to once again confirm the major upward trend and signal the "all clear" going into the fourth quarter and into next year.. A failure to do so in the next few days MAY present a sign and a speedbump in the upward move that has been recorded to date.. A cautionary flag that might suggest a pullback to lower levels and test lower support..

    For LT investors this is all short term gyrations that are to be expected along the way, and in no way changes the LT trend that has been in place.

    Remember we already had yet another Dow theory confirmation of this secular bull market back in September. Best case scenario, the market stays in overbought territory , we slowly grind higher, get that 130 point move in the Dow, followed by a shallow pullback to the levels mentioned above and then resume the uptrend. This stairstep pattern - 2 steps up one step back is extremely bullish.. It suggests rotation within sectors & flushes out some excess along the way to more gains..

    What About Earnings ?

    So far this earnings season, 62.6% of the companies that have reported have beaten earnings estimates. This quarter's reading is at the moment the highest seen since Q4 2010, but there are still more than 1,000 companies left to report, so it's not "over just yet". However this start is encouraging given the dire forecasts that were being bandied about. Historically, the earnings beat rate has drifted lower as the reporting period progresses, so we can "guess" that it finishes somewhere around the 60% mark. Not bad at all...

    While the earnings beat rate has been pretty strong, guidance has been weak, which is nothing new to this market. I mentioned in an earlier commentary that I anticipated CEO's won't put forth a "rosy" outlook given the DC debt ceiling fiasco we just went thru. Why would they ?, They won't put their necks out there with a perfectly legit reason to forecast a cloudy, uncertain future because of the dysfunction in DC.. The bears will take this & run with it as a negative, however I suggest sitting back, analyze each individual situation,then for the most part, discount the lowered forecasts.

    We are currently in a slow growth environment with the wall of worry that we are reminded of daily.. THAT is a good environment for equities. The market is stating and forecasting the "change" in the direction of the economy since the financial crisis. In addition it is forecasting the secular changes that are now in place as I mentioned here:

    http://seekingalpha.com/instablog/706857-fear-greedtrader/2260842-secular-changes-my-secular-bull-theme

    These sea changes will grow this economy even further and in my opinion keep the secular bull trend in place with it.

    Best of Luck !

    Themes: Market Update Stocks: SPY, QQQ
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Comments (9)
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  • Land of Milk and Honey
    , contributor
    Comments (4395) | Send Message
     
    Interesting article to read!

     

    Earnings seem okay, eye balling it. It's still a so-so recovery, but somehow...they're doing okay...

     

    I read something earlier, probably on a marketwatch article, that the market usually precedes the general recovery by as much as 6 months. Doesn't fit well here considering all the manipulation and market doing well for several years with the employment economy so-so, but maybe we're finally reaching take off speed.
    27 Oct 2013, 11:13 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1760) | Send Message
     
    waving at you Curls!!! Nice new name, I like it ; )
    30 Oct 2013, 02:06 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4395) | Send Message
     
    @ BSF

     

    Thank you :). Waving back!!
    30 Oct 2013, 04:19 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1760) | Send Message
     
    Like your analysis F&G.

     

    You need to update....check out what is happening today, 10/30 2:03 pm....wow.

     

    Gold is getting very interesting. The markets are recovering a bit, slowly.

     

    Is it time to trim some winners & cast off the losers? According to Cramer last night, an S&P chart expert says we may see a little correction by next week.
    30 Oct 2013, 02:04 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5365) | Send Message
     
    Author’s reply » Blue,,

     

    I always advise to take some profits as we go along.. If a company disappoints and it looks to be a pattern rather than a one time event it should be cast off.. Each case is unique to itself.. There will always be opportunities,, Look at (CMI) great company being sold off. I am looking real hard at that one right now as I believe the last report was a one time event ..

     

    on the other hand one that disappointed me is (DLR) , sold off big time today ,, this is now becoming a pattern and I sold most of my position today.. I bought at all diff prices , and recently thought it was a good buy around 52-53.. It still has a decent yield around 6% & the distribution is well covered , but I feel its dead money now and will use that cash elsewhere..
    30 Oct 2013, 04:45 PM Reply Like
  • BlueSkyForever
    , contributor
    Comments (1760) | Send Message
     
    F&G, I got hit on (DLR) too. Not sure what to do just yet, as it's in my IRA. If the dividend is ok, might keep it for awhile to see if it goes up a little.

     

    What are your thoughts on gold? Big swings today, it was amazing to watch. Before 2 pm (Fed announcement) it was up, over $8. Then after the mtg, & the news that nothing will change, it swung back the other way, down $8. Now it's close to what it closed at yesterday.

     

    I'm expecting gold to trend lower, but it looks like that govt shutdown scared the crap out of a lot of people, or whatever! Gold should go down for so many reasons, but it sure is hanging on.

     

    From what I'm getting from market experts (on CNBC & from reading) we will see some market volatility, but should be back up by the end of the year. Next year, who knows. This is why I like to buy quality companies & ignore the market. Unless the company's business gets hit hard & they are going out of business, no reason to sell short term. Like (MCD). Or (JPM). In the long run, both will be fine. I haven't sold (IBM) either.

     

    When you look at a company over a 10, 15, 20, etc. year period, you see the stupidity of selling great companies after initial gains (or losses).

     

    Chuck Carnevale wrote a good article about holding growth companies long term

     

    http://seekingalpha.co...

     

    I have a few companies now that I think will do very well long term (DNKN) (TSCO) (SBUX) (KKD) and wish I had (DPZ)

     

    Even some of the old timer companies can do great, check out (MCK) !
    30 Oct 2013, 05:27 PM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5365) | Send Message
     
    Author’s reply » Blue ,
    agree with your assessment on the companies you mentioned.. they are buys on dips.. get quality names when these pullbacks occur ..
    Chuck Carnevale is great , he adds plenty of wisdom here and everyone should follow his advice ..

     

    I also believe Gold will trend lower.. the downtrend is in place and until broken, the path of least resistance is down,, It really should have rallied today ,, but since it didn't , it may be another sign that it will eventually fail here & test the lows of 1200. Longer term into '14 , I see it much lower..
    30 Oct 2013, 06:07 PM Reply Like
  • Land of Milk and Honey
    , contributor
    Comments (4395) | Send Message
     
    @Fear

     

    What do you think of current quarter's earnings so far? I saw comment on marketwatch of "tepid" and so-so, which seemed inaccurate. It was paired with "why market is down" yesterday, so I'm thinking it might be general daily jibbering to explain the market, and not an accurate view.

     

    Looks like we've got the "good news is bad news" thing going on today. ...like tapering may be sooner than next March, maybe even in Dec.
    1 Nov 2013, 11:08 AM Reply Like
  • Fear & Greed Trader
    , contributor
    Comments (5365) | Send Message
     
    Author’s reply » LOMH,

     

    I believe this earnings season is doing ok, I will publish a market update on the blog tomorrow which will cover that ..
    1 Nov 2013, 08:35 PM Reply Like
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