July 23, 2008
The Market has already experienced
a significant increase from recent lows. Everyone
considers this aggressive move as only a short covering
rally. Now, the underlying expectations of many
recent short-sellers is that this rally will come to an
abrupt end and the aggressive declines will resume
immediately.
Not so fast!
Although our longer-term model
tells us to expect significant declines over the next
handful of years, we can not afford to be shortsighted
during the uptrends that happen in between those
declines. Even temporary bull markets begin with
short covering, but that's rarely how they end.
More often than not, even short-lived bull Markets end
at the expense of novice investors and traders.
With that understood, we should
not stare the beginning of this temporary bull market in
the face. The increases that are likely from
current levels are likely to be significant. Not
until Wall Street becomes green with greed, and not
until small traders get coerced back into the Market
again, will sell signals present themselves.
Very few analysts are willing to
say this, but professional traders do exactly the
opposite of smaller traders when the Market reaches a
top or a bottom. Professionals sell into strength,
and they buy the troughs. If you are trading like
a professional, you too should be long, because the
bottoming process is already well under way.
In fact, the bottom may have been
officially confirmed on Tuesday after the market brushed
off the negative news from Apple (AAPL), American
Express (AXP), and Texas Instruments (TXN).
Pundits will tell you that the
decline in oil is the only reason for the recent market
rally. I won't argue, because oil was the reason
for the Market's recent decline as well. However,
further analysis suggests that oil prices will continue
to slide for the time being too, so that supports a
continued rally in the Market.
My recommendation stands: buyers
should hold onto their current long positions if those
positions are tied to the market. I expect the
Market to increase for the next month or so. The
best bet is a Market based ETF like DDM or QLD.
Short sellers should either sit
this one out or focus on energy.
Good Trading.
Thomas H. Kee Jr.
Thomas H. Kee Jr.
President and CEO
Stock Traders Daily
http://www.stocktradersdaily.com
1.866.213.2067
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