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In my last couple of reports, I mentioned the better action in areas like HOUSING, RAILS, TRUCKERS and COMMODITIES including STEEL. Also turning up nicely were OILS, FERTILIZER and AGRICULTURE, and SOLARS. On top of that, the down and out SEMICONDUCTORS had finally turned up after an excruciating drop punctuated by no rallies whatsoever. Lastly, HOMEBUILDERS also continued to base-build off the lows. Since the market has choppped around and has now moved up into the meat of resistance. The good news so far is the clear lack of selling we saw for so many months...and that's in spite of the news. And let me be clear, there is still plenty of bad news coming out. Consumer confidence at a 26-year low, blow-ups in important names like General Electric (GE | Quote | Chart | News | PowerRating) and Microsoft (MSFT | Quote | Chart | News | PowerRating), OIL at $120, soaring COMMODITY prices, continued drops in real estate prices. I can go on and on. But the market leads the economy. The economy does not lead the market. So we follow the market.
That's the news. Moving forward is much tougher. If there is any problem I have with this market inching higher is that volume has not expanded in a fashion I would like to see. For me, rallies are supposed to have a feeling that buyers are voracious and they cannot do without more and more stock. Maybe that shows up later... but so far, at least to me, it has been tepid.
I am seeing some other subtle and not-so subtle things.
GOLD and SILVER have topped... at least for the short term; maybe a little oversold but the pattern is ugly. The underlying stocks continue to lag the metal badly- which is normally a negative.
I am now seeing some early signs... early signs of the COMMODITY-types acting a little bit late in the game. Not all but I am seeing some serious distribution in the past few days... but so far, nothing is breaking down. Maybe these areas continue higher without any breaks. I think we all know better. I must say some of the names had nasty 2-day drops this past week before a late surge on Friday.
I now want to add that RETAIL is starting to act better as even the worst names like Kohl's (KSS | Quote | Chart | News | PowerRating) are coming off their lows and coming up their right sides. This is good news as this has been one of the worst areas. The market needs RETAIL stocks.
I am also seeing better action in FINANCIALS. Yes... FINANCIALS. Despite more write-offs, FINANCIALS are also coming off their lows with some breaking above resistance. Names like Goldman Sachs (GS | Quote | Chart | News | PowerRating) just broke above near term resistance... and that is a good thing. Remember, many financials had the mother of all washouts on the Bear Stearns (BSC | Quote | Chart | News | PowerRating) death day.
CHINA may be bottoming. CHINA has been blasted for about 50% off the highs... after a melt-up. Just take a gander at the FXI, LFC and CHL to see what I am seeing as they are trying to turn the corner.
Finally, I am seeing some growth stock leaders acting better... albeit in weird bases. This is occurring even though earnings have not been powerful. Google (GOOG | Quote | Chart | News | PowerRating) had its worst earnings report ever and still gapped up 80-plus points. That's what happens when analysts downgraded the stock in the 2 weeks leading up to the earnings. The stock became sold out. Others like Apple (AAPL | Quote | Chart | News | PowerRating), Research in Motion (RIMM | Quote | Chart | News | PowerRating), Baidu (BIDU | Quote | Chart | News | PowerRating) are starting to show good money flows. Weird bases but acting better.
To answer the question I get most often, I have no idea whether this is an intermediate-term rally off the lows or the start of a new bull. I just know there is a lack of selling while the charts continue to shape up off the lows. If distribution starts to creep back in, if leading names crap out, if the sectors that are trying to turn the corner hit the wall, then we will be talking.
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