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Wednesday, December 10, 2008 

Bear market rally in action

We are living consecutive days of gains in the US indices without fundamental reasons. People are buying stocks just believing they are cheap, But are they really cheap? I’m not convinced at all. The big slowdown in housing, the falloff in retail sales and the vertical drop in the LEI (leading economic indicators) are already signalling a deep recession and more troubles for companies ahead.

The company’s fundamentals keep being under pressure and will continue to deteriorate as profit margins get squeezed from higher costs and the inability to pass those costs on through higher pricing. Everyday more companies cut its forecasts and sales. The longer employment numbers persist, the greater the danger that economic activity will contract even further. I suggest that we are under a bear market rally instead a new start of a bull market. The current rally is nothing more than a bear market rally and nothing more. The momentum behind it has been terrible, which is further evidence of more trouble ahead. Be careful with your long positions, the coming days for the economy will be even worse than currently are and we might see a test of a low before a new fundamental and real bull market starts, that's my opinion but only time will tell if I'm right. The markets are now moving just on hopes. Be careful!!!

Here is the trade Idea for Wednesday - Texas Instruments !!!

Chart courtesy of www.stockcharts.com ( click to enlarge )

Shares of Texas Instruments gained 5 percent today after the company late Monday said it expects to report fourth-quarter earnings of 10 cents to 16 cents a share, compared with a previous forecast of 30 cents to 36 cents a share. Things to focus on technical chart is the huge spike in volumn in today session. Probably It marked the end of the slide and beginning of bottoming. Although both 50 day and 200 day moving averages are falling, the rising KD shows the stock is probably now in recovery mode. TXN looks like it is ready to resume the resistance line. If stock breaks above mentioned resistance prices then further upside is expected. Let's keep an eye on it.

Disclaimer : Trading stocks involves risk, this information should not be viewed as trading recommendations.The charts provided here are not meant for investment purposes and only serve as technical examples.

That's All. See you tomorrow !!

AC

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  • I'm a 43 year old Independent Trader using proprietary technical analysis with more than 18 years experience of investing in the US stock markets. I started this blog in 2006 simply as a way to share my thoughts about capital, risk management, and trading. My blog contains only my personal opinion and is provided for informational purposes only.

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