Monday, January 04, 2010

Stocks Start The Year On A Positive Note



First of all, I'd like to say Happy New Year to all of my readers. The stock market began the year on a positive note today with many of the major indices up over 1.5% from last Thursday's close. Since 1973, a big advance on the first trading day of January has been a strong sign stocks will post robust gains for the rest of the year. Schaeffer's Investment Research reports that when the S&P 500 has gained more than 1 percent on the first day of trading, the index has ended the year higher 86 percent of the time. Whether or not that happens this year remains to be seen.

As you can see in the above chart of the Dow Jones Industrials, the stock market is clearly holding is uptrend line that began in March of 2009. As long as this trendline continues to support the market, the uptrend will remain very much alive.

10 comments:

Anonymous said...

but you aren't seeing any divergence there on that chart? if not, I'd still like to point the significant "scrunching" near the top of that trend line. if you aren't familiar with what the term "scrunching" means, that's probably b/c I just made it up! but seriously...volume clearly declining from March to present while price trending upward...isn't that suppose to be telling us something important?

Anonymous said...

oh and thanks for your posts...love reading your thoughts and viewing your charts...lots of good info and worth the time to watch out for them. i found it interesting that over the weekend i read an article that one prognosticator thinks the S&P will break down below the lows of last March...you still have your 4 year cycle chart over in the margin and there's a prediction of a pretty low spot come July/Oct this year that'd be below last March...interesting

Kevin said...

I see divergences as well as "scrunching" but until the uptrend line is broken, its going to be very difficult to make money on the short side...trust me, I know!

Kevin said...

The chart on the right of the 4 year cycle points out that a low is due this fall (September/November. The 4 year cycle tells us when to expect a low but the price level is unknown. The arrow on the chart does not mean price will fall below the March 2009 low. The arrow simply indicates that some kind of buying opportunity should present itself later this year.

Sean said...

A happy New Year to you as well, Kevin. I look forward to your posts throughout 2010.

Sean

d said...

That DOW chart sure looks like the Euro chart you have below it. Minus the break-down, yet.

Anonymous said...

ah...i didn't check back for your note on the 4 year low...that's an important distinction which i misunderstood. thanks for the clarification.

Forex Educator said...

I am not convinced of this rally as underlying fundamental is weak. Thanks for your articles, they are very useful. Happy New Year.

Don's "Trading-In-Action (TIA)" said...

Fundamentals doesn't mean much to me at least on the aspect of trading. They lagged far behind what the market is doing. Also, divergences mean nothing in a trending market. They will keep giving false signals. Trade simply. Trendlines are the most useful tool which are often overlooked by most traders who prefer to use the more sophisticated Aroon's, wilder's etc etc. Kevin has gotten most of his analysis simple and clear.

Anonymous said...

Kevin,
Great work as always. Love this blog. Agree the trend is up but I'm still a bit nervous. While I see the market going up, I'm not seeing much moving in the business world. It's just luffing along.

I fear the market recovery is built on thin air.

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