These projections are the result of screening for technically significant retracement and momentum patterns that have been further screened for value and bullish sector performance. In other words, the projections are for long positions.
$INDU
$SPX
$COMPQ
Monthly Momentum Positive
Positive (OB)
Neutral
Weekly Momentum Negative
Neutral
Positive
Daily Momentum Positive
Positive
Positive
Note: The trading ranges of late have been so narrow as to make
this indicator very sensitive to minor changes on a monthly basis. The bias
however is still fairly reliable, so it should be taken into consideration. (OS)
means oversold and (OB) means overbought.
Fed comments regarding tame inflation and apparently some buzz
around Apple Computer's offering of applications with Microsoft operating
systems drove volume and prices higher yesterday. What is most interesting to
us is that the Fed comments must have spurred building supply companies,
homebuilders, and REITs equity buying, as institutional investors must have
taken Fed comments as a clue that mortgage rates might stabilize.
REITS (HR, HIW, MAA), homebuilders (BZH, CHCI, HOV, and TOL)
scored some interesting reversals, even though in the case of homebuilders,
these reversals came in the midst of down trending or bottoming price action.
Retailers (DKS, PIR, and CBK) and apparel makers (GIL) also made the reversal
list. Internet names (PKTR, OXPS) and insurance companies (DFG, PL, SLF, AOC)
also made significant bullish reversals. Healthcare (BCR, ABAX) and
biotech pharma (ASPV) were also present on the reversal list.
Going forward, if the Fed comments are really true, we might begin
to see a stealth rally in the building materials and homebuilding stocks, but
that jury is probably still out. The neural net models liked two of them, but
the patterns come in the context of recently bearish trends, so the trades or
positions, while cheap on a cash flow or value basis, might be risky on a
technical basis.
Here is what the nets saw today:
GIL 14.81/1 66.7% (relatively short trading history)
BZH 6.55.1 77.8%
TOL 2.24/1 77.8%
On the bare fringes of acceptability:
HR 1.52/1 57.5%
That's it for now. This rally would appear ready to continue,
though we are not convinced that leadership outside commodity related items is
fully developed. Only time will tell if real estate or home construction
related issues are going to run, but the investment seismometers are seeing
some rumbling out there. Only time will tell.
FOR FULL DISCLOSURE: The MrSwing Trading Team took profits on UAG
on a momentum reversal yesterday. The MrSwing Trading Team took profits in ELOS
and MRTN in early session yesterday. The MrSwing Trading Team established a
position in ROC, which was stopped out on a very tight stop and established a
position in TRGL on Wednesday.
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