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Bull Market Continues, But Watch Out Short-Term

  • Written by Syndicated Publisher No Comments Comments
    October 28, 2013

    The market’s bias remains to the upside. It could even be that the debt-ceiling fiasco in Washington helped to buy the bull market more time.

    Economic reports are beginning to show the government shutdown was a negative for the economy, but had less effect than was feared. Yet it had enough effect to make it unlikely the Fed will begin tapering back its stimulus until at least next March.

    Fed tapering is not the only market risk that has come off the table for the next few months, as the market enters its favorable winter season when it makes most of its gains.

    It’s becoming fairly clear that the debt-ceiling crisis is not likely to be a big deal when it returns in February. Both sides have much more incentive to reach an agreement prior to the deadline, after the wrath brought down on their heads from their failure to do so the first time.

    Other risks from outside the market, like the eurozone debt crisis, have also faded into the background at least for a while.

    The slowing trend of corporate earnings in the third quarter is a worry, as are warnings from major corporations of slowing sales.

    But that has been a worry each quarter so far this year, a worry that so far has faded away each time once the quarter’s earnings reporting period ended. And the third quarter reporting period is drawing to a close.

    So fundamental economic and background news is supportive of yet another positive winter season for stocks.

    However, investors looking to increase exposure should do so carefully until the short-term technical situation created by the additional spike-up shakes out.

    There are three short-term technical problems.

    The S&P 500, as well as the NYSE Composite, Nasdaq, and Russell 2000, are again at the overhead trendline resistance that halted their last three short-term rallies. They are overbought above their short-term 50-day moving averages to a degree that also suggests a short-term top is at hand. And investor sentiment as measured by the weekly poll of its members by the American Association of Individual Investors (AAII) jumped to 49.2% bullish and only 17.6% bearish this week, entering the warning zone of too much optimism, perhaps due for a pullback to reality.


    Since the intermediate-term trend is still to the upside, and we are in the market’s traditional favorable seasonal period, such a pullback is likely to be of the short-term variety and present another buying opportunity. Only a significant break below the trendline support would be a cause to revisit that expectation.



    Sy Harding is president of Asset Management Research Corp, and editor of www.StreetSmartReport.com, and the free market blog, www.streetsmartpost.com. He can also be followed on Twitter @streetsmartpost

    Sy was Timer Digest’s #1 Gold Timer for 2012 (Gold Timer of the Year) and #2 Long-Term Stock Market Timer.

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more.