Saturday, March 28, 2009

Dow Surges - BULL MARKET?

Dow Surges – New Bull Market?

The Dow Jones Industrial Average surged from a March 9 low of 6,440 to a high of 7,969 before falling back on Friday to close at 7,776, up nearly 500 points for the week and up nearly 1,100 points over the past three weeks! Virtually every sector of the market rose this past week with the exception of bonds and gold. Many commentators began stating that with the Dow’s upthrust of over 20%, “we are now in a BULL MARKET!”

In an effort to keep things in perspective, notice how the Dow average has rallied to the four-month moving average. A review of my universe of stocks reveals that many stocks are following this pattern. Will this be a level of resistance?

As I mentioned in my last post, it appeared that volatility levels were finally reversing indicating that the market could be starting to moderate. Be careful however not to get sucked into the euphoria that dramatic market moves instill. Be patient and wait for solid chart foundations to appear before making a move. Also consider that the 7,600 level on the Dow had previously been a strong support area. Before any sustained move can develop, the Dow will probably have to come back and successfully test this level.


While many stocks and market averages appear to have risen only to a falling trendline, many TECH STOCKS are showing different patterns.

PowerShares QQQ Trust (QQQQ – 30.82). Notice how the QQQQ, an exchange traded fund that represents the top NASDAQ stocks, has tested its previous price lows and is now rallying. Notice also that it has risen well above it’s four month moving average, indicating strength. A review of technology stocks shows that quite a few have not only tested lows and established a base, but are at or above RISING four month moving averages.

Qualcom (QCOM – 38.94) is a prime example of a stock that made a three month test of the lows. The stock price has surged 16.5% so far this month. Strong base, rising trendline, I would expect this stock to continue rising.

Research in Motion (RIMM – 45.01) has jumped 12.7% this month after successfully testing the December lows. Even a move back to its recent high of 60 would generate a 33% return.


In our March 1 posting, we said that there were opportunities in Retail as well as Technology and recommended Kohls Department Store. As the chart shows, we were right on with our pick. Kohls (KSS – 43.14) has surged 22.8% this month. Other retail stocks have also done well: Gap (GPS – 13.05, +21%) and Best Buy (BBY – 38.04, +32%) were also on our client pick list.


Next week offers more excitement as President Barack Obama is expected to release details of a new $22 billion bailout package for General Motors and Chrysler. How the market will react to this and other news is anyone’s guess at this point. With the Dow just 100 points or so above the important 7,600 support level, my guess is that the Bears aren’t done yet and will try to drive prices back down.

With the end of the month falling on Tuesday, look for my end of the month blog that will include not only the US stock market, but also the Mexican market and the Mexican Peso.

No comments:

Post a Comment