Exposing Ideas to the Envelope of Serendipity

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Sunday, January 10, 2010

Bullish Start to the Year

Stocks kicked off the new year with solid gains last week, with all of the major indexes making new 2009 - 2010 highs and running into the close on Friday. Volume picked up on the week, a disappointing jobs report was largely ignored, and market breadth was decidedly positive. Add to the picture a weaker dollar after a recent run-up, renewed strength in precious metals, oil, and other commodities-related stocks, and increasing numbers of stocks and sectors either breaking out of bases or hitting buy points, and it would appear that the bulls aren't ready to roll over just yet.

Running through my charts over the weekend, bullish setups are widespread, with many stocks and sector charts closing above key resistance levels. Let's see a few of these, starting with the S&P 500, still trekking northwards towards the critical 1,229 level, with little real resistance between here and there.

Next up is the Dow Jones Transportation Index, also at a new high and bullishly positioned for further upside.

The energy sector logged solid gains last week, with OIH in particular running impressively and closing just above some short-term resistance.

Precious metals turned back up in earnest following a recent correction, and appear to be headed back towards the highs. GDX bounced off the lower channel line and should work its way higher from here.

EUR/USD is trying to turn up off support after a sharp correction over the past month or so, but still has some work to do.

It is appearing increasingly likely that the nearly two months spent in an often agonizing range-bound sideways consolidation in the major indexes may actually have contained, or hidden, the elusive correction many have been expecting. During that phase, many individual stocks and groups actually did correct, in many instances quite sharply, while others logged gains as some sector rotation was evident.  For the near-term at least, technicals look quite bullish, and buying the dips will likely continue to be an effective strategy for awhile longer. Indicators may start registering short-term overbought readings in a few days, but the primary trend for now, is still alive, well, and up.

Trade well.

-- Brinkley

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