Cautious on the S&P.. Playing Both Sides
March 2nd, 2006 by BWV
I am troubled by this market.
First, this weekly chart of the S&P 500 shows that we keep hanging around the Northern area of the very legit uptrend channel. (actually its the S&P tracking stock, SPY or “spyders”). That channel has dictated the bounds of this market since January 2004… over 2 years running.
Add in:
- Recent DJIA outperformance.. big caps usually move last
- Alternating (and volatile) up/down days for the past week.. index volatility increases around turning points.
- Ten Year Treasury yields breaking out.. higher. This is my biggest concern now.. we’ve all become accustomed to insanely low rates across the board, and I think a big jump in yields would “shock the world.”
That said, there are still lots of good looking individual stock charts. I’m long 15 names right now. Most of them are trading above the close on their earnings announcement day. Check out the chart of BUCY here.. a big mining equipment maker. The close on the day earnings were announced is marked with an “E”.. and a horizontal line is drawn at that price. Trading above that price means the big boys like this stock even better now than on the day they announced solid earnings news.. a very bullish scenario.
On the other hand, IBM can’t get out of its own way. After it struggled along near the $80 area for most of 2006, this little break down from the recent Bear Flag has me thinking it’s about time to get paid for my patience. I added to the IBM short today.
Long BUCY
Short IBM
