Nasdaq Overbought but Could Go Much Higher

Tuesday, May 14, 2013

Nasdaq Overbought but Could Go Much Higher

Strong positive momentum should carry the index

By Sam Collins, InvestorPlace Chief Technical Analyst

New York, May.14, best stock .- Stocks closed mixed on Monday with blue chips, as represented by the Dow industrials, off slightly. The U.S. dollar continued to gain against a basket of currencies on news that Chinese economic data missed expectations. As a result, materials shares were lower and Alcoa (NYSE:AA) was the biggest blue-chip loser, off 2%. Health care, financials and consumer staples were winners, while Treasuries fell slightly, bringing the 10-year yield up 2 basis points to 1.925%.

At the close, the Dow Jones Industrial Average was down 27 points to 15,092, the S&P 500 was unchanged at 1,634, and the Nasdaq rose 2 points to 3,439. The NYSE traded 593 million shares and the Nasdaq crossed 367 million. Decliners outpaced advancers on the Big Board by 1.5-to-1, and decliners were slightly ahead on the Nasdaq.

Click to Enlarge

The Nasdaq continued its march higher following the breakaway gap in late April. Monday established another new 14-year high, and since there is so little chart action to compare it to, it is not possible to estimate a target for the move higher.

Support rests at 3,330 and the 50-day moving average at 3,272. Even though MACD is overbought, strong positive momentum could carry the index much higher.

Conclusion: Despite Monday’s pause, the overall trend is for higher prices in all indices. Group rotation remains strong. Short sellers are running for the hills, according to a recent report by Nasdaq. And even the weekend’s Wall Street Journal piece on the Fed’s contingency plans to move to unwind quantitative easing failed to cause a correction.

A fundamental positive: By Friday, May 3, almost 1,700 companies had reported quarterly results and 59% topped earnings estimates, according to Bespoke Investment Group. In addition, 52% have beaten revenue estimates. Compared to prior quarters, those numbers are positive. ...

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Benjamin Graham Was A Crappy Hedge Fund Manager

Jack Bogle, the outspoken godfather of index funds and passive investing strategies, didn't approve of a recent Wall Street Journal article defending hedge funds.

In particular, he took issue with the author's reference to Benjamin Graham, the legendary Columbia finance professor who literally wrote the book on Security Analysis and mentored Warren Buffett.

Bogle wrote a letter to the editor. Here's an excerpt: Citing Benjamin Graham as the first "hedged fund" operator is an especially unfortunate example. "The trick," Mr. Rice writes, was Graham's "clever way to make money . . . whether it [the market] continued to rise, or started to fall." ...

Proposal for New Hedge Fund Fee Structure: 1% + 33% of Alpha

By The Big Picture

One of my pet peeves is the way that insiders -- whether corporate CEOs, hedge fund managers, or elected politicos -- capture compensation (or credit) for normal cyclical gains they had little or nothing to do with.

This is the approach favored by the Crony Capitalists — those people pretending to be free market participants, and who merely pretend to be creating value. They are taking credit for structural successes that would have occurred with or without them. What they are actually doing is capturing value, not creating it — and then transferring it from its true owners (shareholders/investors) to themselves.

This is wrong; it is legalized theft.

If you want to see a good example of how CEOs transfer shareholder wealth to themselves, a good place to start is Roger Lowenstein’s 2004 book, Origins of the Crash: The Great Bubble and Its Undoing. The section on CEO compensation is astounding; these guys were essentially getting wildly overcompensated for being CEOs during a bull market. The prime example was the CEO of Heinz, who gave himself (with the tacit approval of his Board of~~Crony~~ Directors) a $90 million bonus. And this was back in the early 1990s, when $90 million was real money.

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www.ritholtz.com

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All Time Record Gold Transactions Reported By LBMA

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Today's top Green Energy Good News

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