Posts filed under “Technical Analysis”
Part II of the Paul Desmond Q&A is posted at thestreet.com (free)
This is the half that really focuses on market tops. If you read just one thing this weekend today, this is it.
Here’s an excerpt:
BR: So according to your analysis of bull-market tops, where do you think we are in the cycle. Are we close to the top, getting near the top? Weeks or months away? What’s your general take, without scaring the bejesus out of everybody?
PD: "We are well in the process of forming a top, but we are not to the final stage of this thing yet.
If we were to measure the final top, based on the Dow Jones Industrial Average, — which is not the best way to judge a bull-market top — it is very possible that the Dow has not made its final high yet.
This past week, we took a look at the Dow Jones Industrial Average stocks, the 30 component stocks of the Dow, and what we found was that there were, based on our way of analyzing individual stocks, three of the 30 stocks in strong uptrend patterns — just 10%. And 20 out of the 30 stocks were in well-defined downtrend patterns. So you can see the selectivity that is present there, with 3 of the 30 stocks in uptrends, 20 in well-defined downtrends.
That same type of selectivity is occurring across the broad list [of stocks] as well. Not to the same extent, but it is occurring. And so we think that it is possible that the final highs in the major market averages have not occurred yet, but that a lot of individual stocks have already rolled over into their own bear markets.
Now investors generally don’t buy the market averages, they buy individual stocks. So what we are telling people is that you have got to be watching your own individual stocks at this stage of an old bull market. What you should be doing is holding onto the strongest issues in a portfolio but culling out any stocks that are failing to participate in rallies. So for example, today, an investor ought to be going back through his portfolio and saying, ‘Well, the Dow was up 140 points today, did my stocks participate?’ And if they didn’t, that might be a sign that for that individual stock, the bull market is at or near its end and greater caution should be taken in holding onto to those kinds of stocks."
Be sure to print out both parts!
Q&A: Paul Desmond of Lowry’s, Part II
RealMoney.com, 2/19/2006 9:50 AM EST
I got involved in a debate earlier at RealMoney – Columnist
Conversation, and wanted to pass it along here.
Pre-GDP (1/27/2006 7:31 AM EST), I wrote :
1) Technicals remain strong, and continue to be the driving force short
term. But economics look weak, and continue to be source of concern
2) Last Friday’s market actions was the market’s early warning sign.
Very heavy volume to the downside on a big selloff is never a good
thing. I interpret that day as a foundational crack of the cyclical
Bull market. Again, we are not looking for a 1987 situation, but rather
a Q1 topping out, and an ugly rest of the year.
3) Gold also looks toppy — it’s well overdue for a 10% correction. We
are short here, but would re-establish a long position in the 480-510
4) A 500 point day in Japan is too exuberant — it’s a sign of very
emotional trading. Historically, these sort of buying frenzies tend to
end badly. As such, we are lowering our multiyear price target on the
Nikkei down from 21,000 to 18,000. I would not be surprised to see this
lowered again before year’s end. And the Korean Topix, which I have
liked for some time, is geting crazed. Still plenty of upside, but
Norm Conley raised a legitimate question about this:
"It seems as if you are taking two outlier one-day moves in markets (one "up"
move, and one "down" move), and extrapolating that although they are
contradirectional, they both carry ominous portents."
My response was: