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Weekly Trend and Trade Review |
December 31, 2009 |
Trader Talk
The short term momentum oscillators remain positive, confirming the bullish stance of the AlphaKing Trading indicator. The accumulation/distribution profile has turned positive, with new highs for the stock indexes this week resetting the count. The leadership profile remains positive, with 322 new 52 week highs, versus 49 new 52 week lows.
The 4% rule remains positive, confirmed with bullish Federal Reserve policy. The VXO volatility indicator closed the week at 19.9, showing little movement on the week. We continue to await a corrective plunge that sticks to confirm the wave 2 bear market rally peak is in, and the next down-leg of the secular bear market underway, with the recent push to new highs for the stock indexes opening the door to an extended blow-off run to test the resistance shelf near Dow 12,000.
Traditional seasonal trends have us looking for a year end rally that carries into the new year. The Presidential cycle suggests a grim 2010 once the current rally stalls and reverses. The Benner-Fibonacci cycle is fast approaching the end of the bullish period, with a crashing bear going forward expected into 2011. The AlphaKing combination cycle sees a rally into early March.
Summary:
2009 ended with a whimper rather than a bang, though that may not be the case starting Monday, when traders and trading volume return from a very long hiatus. The year ended with the least amount of bears since early 1987, and we all remember how that turned out! Back then the record low reading of bears was a warning of bad things to come, rather than a signal that the end had arrived. So many of the indicators and technical set-ups we tracked suggest a capitulation blow-off is very likely, and that such a mega parabolic advance will end just like the 1987 and 2000 one ended - with a crash! How the market held together this year with such terrible internal technical action is beyond me, but hold on the bulls did, and January is noted as being the best month for the bulls. This reminds me so much of the late 1999 run that ended with a mega advance to the NASDAQ 5000 peak in the first quarter of 2000. Back then, in testing, our new system said to be 50% invested due to the mega danger of the reversal once the peak landed for real, and such is the case now. Thus we are following the rally into 2010 though with a heavy and healthy dose of skepticism. Once the investment ducks better line up then we will become much more aggressive, though that is not expected to be on the long side till the second half of 2010 at the earliest. The bears should own the middle of the year, and we will see how things stack up then as to whether the great bear market has returned, versus the current cyclical - sucker? - bull market having significantly further to run.
Team AlphaKing wishes you and yours a happy and prosperous new year.
401K investors should have ½ of their portfolio invested in a stock index, or aggressive growth, mutual fund, with the other ½ remaining in a money market fund.
The Index portfolio is ½ invested in QQQQ with the other ½ remaining in cash.
Kevin Wilde, Chief Trading Strategist, AlphaKing.com
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