IBD says yesterday's "pong" bounce confirmed the rally that began mid August on the pre-discount rate cut reversal day. The Nazz had higher volume and was up over the 1.7% cutoff amount. One might as well go along with long-standing rules. IBD messed up August 2006 when they let a bearish pre-conceived attitude induce them to not accept a minimal rally confirmation signal.
And from the index charts, an inverse head & shoulders bottom does exist on the Nazz, S&P and Dow. The neckline is not straight, but the ping-pong right neck two day point might be deceptive. Well, of course Tuedays and Wednesday were ping-pong days, too.
The Bible of stock patterns - "Technical Analysis of Stock Trends" by Edwards & Magee [5th edition, 1966] says sloping necklines are OK as long as the shoulders are pronounced AND the neckline break has VOLUME. I don't often write about volume as beefers and ETF games make it somewhat suspect nowadays. But here I think it might matter. IF the inverse H&S pattern is correct, there should be resistance at the downtrending neckline, around 1475 S&P cash. So there must be volume on a breakthru if the pattern is correct. Let's see what develops.
The Fed needs to cut rates at least 50 bps.
European banks are still starved for dollars. I think the Mideast and Russia governments are holding petrodollars back, hence the Euordollar famine.
XLE is showing an intermediate term bottoming pattern. XLF might show an inverse H&S bottom, too, but it ragged.
The beefers favorite toy, the Russell 2000 index, shows a "W" bottom pattern. Some consolidation over the 50 DMA and 200 DMA might set up a big move.
It's Thursday - in keeping with trends on the "Street" lately, I suspect that many participants will start exiting for the Hamptons & other holiday weekend spots this afternoon. Maybe beefer managers with gutshot returns will play more ping-pong. Don't be fooled unless something significant occurs.
Wait for a trend unless you like risky games like I play - buying sectors I think will outperform next year. Unless you have a fundamental outlook, that might be hard for you.
I still like the big cap financial, big integrated oils, deep water drillers, miners, and Internet related Tech. That's where I'm looking for my 30% gains over the next year.
Even with the carnage in some of my stocks, the Alpha Fund is still up 34% YTD. My high was 51% so I'm well off those levels. And I've shifted a bit, selling most of India and buying the big cap financials.
PS: The iPhone works great! I put some Julie Andrews and Judy Garland songs on it, along with some Artie Shaw and some old World War I era songs, like, "It's a Long Way to Tipperary". Later this morning, I'll put my stock lists onto it. The picture, sound and ease of use are superb!
PPS: Selling more TIPs bonds at the close & buying stocks: US, Pacific, Europe, Emerging Markets, some REITS, too.
P^3S: Bought some more AA, DOW and WB.