About The Market

Here I present two interesting point of views about the current situation of the market. The first is from Steve Reitmeister, Excecutive VP from Zacks Investment. The second is from Sam Collins from Zone Options.

	ZACKS.COM PROFIT from the PROS Tactics that Work in Good Markets and Bad

Dear Subscribers,

1) Why did the market bounce continue on Wednesday? Because the reasons for its recent decline are ridiculous. Plain and simple the economy is expanding. Corporate earnings are exceeding expectations. The Fed is still accommodative. And valuations are reasonable. All other concepts are noise and nonsense.

2) Will stocks continue to go higher? In the short run...that is anyone's guess. This bounce may have a little more legs. But I still think volatility is the name of the game this summer. Looking out to years end we will likely press to new highs above Dow 13,000. When that sustained move takes place is a mystery. So don't try and solve it. Just stay invested.

3) What should investors do? Maintain a portfolio with stocks experiencing upward estimate revisions and trading at reasonable prices. Keep this portfolio in tact no matter what crazy gyrations happen with this recent volatility. Once it is over then your stocks will start racking up profits. If you can't handle the volatility, then get out of stocks today and forever. i.e. Stocks are volatile. So if you don't have the stomach for it, then best you know that now and you find another way to rustle up extra profits outside of your day job. I hope you choose the former path. 

How You’ll Know When to Buy Metals and Energy Again

Breakdown in dollar ETF could be the signal traders are looking for

May 19, 2011, 2:00 am EDT   |   By Sam Collins, Chief Technical Analyst, InvestorPlace

Stocks turned north yesterday following an upside reversal of several important indices on Tuesday. But will the reversals stick and lead to a broad market advance, or will stocks fizzle?

On Monday, we highlighted two patterns on the charts of the Nasdaq and Russell 3000 that told us that the presence of flags and pennants is characteristic of a bull market run.

Interestingly, yesterday Arthur Hill of StockCharts.com IDed a flag on the chart of the SPDR Dow Jones Industrial Average (NYSE: DIA), and said that a move above Friday’s high ($125.85) is required to confirm the reversal (chart not shown). A breakout is required to confirm a bullish flag and, in my opinion, the flag on the chart of the underlying index (below) would be triggered when the resistance line, now at the conjunction of the 20-day moving average (green line) and the red resistance line at 12,640, is exceeded on a close — just a mere 80 points above yesterday’s close.

The Dow’s chart shows several more bullish components. The breakout from the double-top (head-and-shoulders) black line is very bullish and gives a target of about 13,350. Before the breakout, that line was called “resistance,” but it now becomes “support.” And there is another positive indicator: Momentum is turning up from an oversold level (red histogram.)

The blame for much of the recent decline in the prices of precious metals, energy and stocks has been attributed to a stronger U.S. dollar.

But, on May 13, we drew attention to the chart of the PowerShares DB US Dollar Index Bullish Fund (NYSE: UUP) noting the importance of the support point at $21.59, and saying a close under that number would be a “plus for stock market bulls. Yesterday, UUP closed at $21.59 and the stochastic is very close to issuing a new sell signal. 

Traders should watch this very closely since a breakdown in UUP could drive the dollar down to the red dash support line at around $21.25, and provide for trading opportunities in precious metals and energy stocks.