Two Up Days in a Row

By all accounts the market continued to move higher Wednesday.  The SP 500 managed a new closing high for the move and the NASDAQ COMP tried to but missed by a small margin.  The bulls are having a good time and this will probably continue for a short while.  Today the momentum indicators have pushed up and are near over bought levels.  If we were to guess, we think this rally has about one more day in it.  Of course, the move over the past two days in the NASDAQ has been quite impressive.  The other NASDAQ index we follow, the 100, has been lagging the COMP and we’re not really sure why that is.  

For the market in general, this is definitely a time to start taking some profits for you bulls.  We talk about this all the time, I know, but the reason you are in the market is to make some money and the last two days have done just that.  What are you going to do?

The major markets we follow have mostly been up with the stock market up the most the last few days.  Oil has enjoyed a rally from $58 to $63 in about a week and gold is up from $495 to $535, while the HUI has made a big move from 252 to 303 in two weeks (yes, I know, we are out).  Bonds are up, too.  The only big market where we should be somewhat concerned is the Dollar which has not liked the Fed’s news very much.  

We have talked about the possible dollar reaction to any slow down in interest rate hikes.  The primary reason for the Fed to raise interest rates has been to protect the dollar, not to fight inflation as is the normal thought process.  We do expect to see at least another rate hike coming here in late January which the dollar will shrug off and the stock market will probably cheer for a day or so, it being thought to be the last.  

Until we have a clear place to enter new trades we will wait until this rally is exhausted which may be on Thursday but we just don’t know for sure.  Whenever it is exhausted we expect to have a pull back and then a rally, just because, but a rally that doesn’t quite make a good high.  That will be our best signal to establish new short positions.

Until then be careful and be selling into these strong mornings.

Dow Industrials:  10,880.15  +32.74  
RYVNX:  18.25
TLT:  92.00
BEGBX:  13.35   (two days of dollar declines have pushed this up)