I came into Thanksgiving with a little bit of scepticism short term on the markets. I had noticed that not only the short term momentum oscillators were overbought, but also the intermediate term ones as well. So I’ve spent the last few days examining the bull market thus far, and our current uptrend. And, I came to one conclusion: we’re in a very strong market and we’re going higher! This uptrend looks better than the wave (i) Apr ’05 advance and the Oct ’04 wave (1) advance. In fact, it looks more like the explosive wave (III) Mar ’03 advance. Three of our four indices: NAZ/NDX/SPX, are at new highs and in uncharted ground for the bull market, and the DOW is only 20 points shy of a new EOD bull market high. The TRANsports keep on climbing, and the SOX index is bumping into 500 already. What a difference one month can make!
LONG TERM: BULLISH
The explosiveness of our third of a third continues to impress even this bull. Over the next year or so, (yes I think it will take that long), we should experience two more uptrends similar to this one, but probably not as explosive. Remember we are in wave V of the bull market, which has been subdividing into an extension wave. Waves 1 – 2 of V, and waves i – ii of 3 of V are behind us, and we are currently in wave iii of 3 of V. See "bullmkt" charts. Thus, there is a lot more work to do on the upside in this bull market before it ends. Stay bullish!
INTERMEDIATE TERM: UPTREND
As I mentioned the other day I was getting a bit concerned about the relentless advance since the end of October. Hardly even a 2% intraday correction for four weeks. That’s a very strong impulse wave! You will notice in the "daily" charts that the MACD is indeed way overbought. However, my MMI has barely budged for the past week, and we are nowhere near any type overbought condition that would indicate an intermediate term top. This uptrend should continue for quite a while. The SPX has also been impressive, and has already come within 1% of our initial target of 1280 for the entire advance. Our secondary target of 1345 is definitely within reach before this uptrend ends. The NAZ has lagged a bit. Our initial target was 2356, with a secondary target of 2560. It closed on friday at 2263, about 4% short. However, we all know how fast this index can rally. Would not be surprised if it closed the gap before any appreciable correction occurs.
SHORT TERM: POSITIVE
From a purely wave count viewpoint, I can nearly count five waves up from the end of October. However, due to the strength of this advance I see this rally continuing as the waves continue to subdivide. On the very short term 5 day RSI, we are about as overbought as a stock market ever gets: a 90+ reading. Yet this recent seven day advance has shot right up, without one closing down day. Therefore, I would expect to see some divergences in momentum before even this particular rally ends. So I would have to conclude that this market is still going higher, before any appreciable correction occurs. Any, short term pullback would just be another opportunity to add to my current long positions.
New charts all around … Stay bullish and good trading!