Many of the recent tops in world equity markets have been broken to the upside. WCTS suggests equities in general ought to move higher through August as low volumes and bullish comments from central banks suggests there is little resistance to higher prices. One ought to be careful about getting too bullish in the short term as we are approaching significant technical resistance (both the gap and the weekly 50% level). As well, the September/October time frame is usually not very kind to stock prices. Having said that, we are moving higher in the short term so enjoy the rally...
Investors were given the 'All clear' signal in May (when the 13EMA crossed back above the 30 SMA) and while I have been reluctantly bullish that indicator has been correct. Traders have been given the all clear to be long on this week's break through the June highs. A word of caution though, the lows from March were "V" shaped suggesting that they ought to be tested in earnest a some point down the road. For the time being I will remain on my long tech./ short financial proxy and have added to that trade idea with the recent purchase of Jan '10 GS $120 put options. I will use the rally over the coming weeks to add to that trade as the chart below suggests that even a 50% correction of the massive rally over the past 6 months ought to bring prices back into the $110 area...
That's all for this week,
Brian Beamish FCSI
The Canadian Rational Investor
the_rational_investor@yahoo.com
the-rational-investor.com
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