Tags: Market | Bullish | stocks

Market Looks More Bullish, Except for the Lack of Bulls

Wednesday, 28 Dec 2011 08:29 AM

Last Friday, the S&P 500 finally took out resistance at 1,260 and closed above its 200 day moving average.

The Dow Jones Industrial Average broke out from a reverse head-and-shoulders pattern and closed over resistance at 12,250.

The market looks more bullish, with a couple of higher lows since the October bottom. The market is now offering some setups in leading stocks that want to break out higher.

We still have some positive seasonality left, which is also bullish.

However, we still need a high volume-conviction breakout in the S&P 500 and other indices to confirm that a new uptrend has begun. We have been here before in October, November and in early December only to fail and pullback from these levels.

Also most of the world's markets are still trending down or sideway.

I use a personal watch list I call the "Market Monitor" which has 30 components (ETFs), which in my view represent the world's economy from a "bullish" point of view.

It includes emerging markets, Europe, commodities, bonds, currencies, etc. If more of the market monitor´s components rise, that reflects a stronger world economy and a stronger trend and breadth of the markets.

Of all the assets that compose the market monitor only three of them (10 percent) are trading above their 200-day moving average and only barely so (DIA, SPY, USO).

The rest of the markets are trading, in most cases, below their 200-150-50 day moving averages so a new global market uptrend is still far from being confirmed. We will probably roll down lower again if things in Europe get nasty.

If a new "bull market" is starting, the beginning stages will be choppy as most world indexes have a lot of resistance to challenge and stiff sellers will surely appear at these levels.

Given the current conditions, I think trading break outs will still remain challenging (most have failed since July or so) and buying pullbacks on quality stocks will be the best trade.

From a macro point of view, the U.S. economy seems to be improving after a couple of bad quarters but the European situation is still far from being "fixed" so expect headline risk to remain high and markets still sensitive to the developments of the old continent.

Bottom line: The new uptrend still has to prove that it is valid and there will be many pullbacks going forward that will be lower risk entries if you are bullish on the markets. Avoid chasing and stick with quality stocks that are showing good earnings growth, high profitability and a strong technical uptrend.

About the Author: Victor Riesco
Victor Riesco, a financial analyst and trader in Santiago, Chile, works as an independent adviser and educator and operates a brokerage and trading business for local investors. He is the founder and editor of www.globaltradingpad.com. Click Here to read more of his articles.



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VictorRiesco
Last Friday, the S P 500 finally took out resistance at 1,260 and closed above its 200 day moving average. The Dow Jones Industrial Average broke out from a reverse head-and-shoulders pattern and closed over resistance at 12,250. The market looks more bullish, with a...
Market,Bullish,stocks
1900
2011-29-28
Wednesday, 28 Dec 2011 08:29 AM
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