Todd Market Forecast for Wednesday Jan 27, 2010
Available Mon- Friday after 6:00 p.m. Eastern, 3:00 Pacific.
DOW + 42 on 150 net declines
NASDAQ COMP +18 on 250 net advances
SHORT TERM TREND Bearish.
INTERMEDIATE TERM TREND Bullish
Yesterday, Robert Prechter, in an interview on CNBC, expressed the opinion that the rally from the March lows was over and that it was time to get out. This spooked the market and helped turn a weak rally into a decline.
I don’t agree with Mr. Prechter for a couple of reasons. First, bear market rallies tend to last 2 to 3 months, not 9 as this one has. Also, very sharp declines from new highs tend to be a bull market phenomenon. Bull markets periodically make you question your faith whereas a bear market sneaks up on you. The phrase, “like a thief in the night” comes to mind.
The FOMC announcement was fairly harmless and decided to keep rates very low. There was one dissenter, Thomas Hoenig of the Kansas City Fed seemed to think it was time to raise rates.
I think that there’s a decent chance that we have seen a short term bottom. We had a curling up of the 4 day RSI (arrow) and volume increased. Breadth was pathetic, but sometimes that turns more slowly. If we are up tomorrow at the close, we’ll go back to the bullish side. We also have a trade in the bottom line section.
The dollar was up again and this pushed down gold, silver, copper and crude oil. Bonds were higher.
BOTTOM LINE:
Our intermediate term systems are on a buy signal.
System 2 traders are in cash. Stay there on Thursday.
However, we do have a trade. If the S&P 500 is higher at 3:55 P.M. EST, which is five minutes before the close, buy the SSO at the close. This is not a system 2 trade which is strictly mechanical, but perhaps we can hold on for a while.
NEWS AND FUNDAMENTALS:
The Mortgage Banker’s Association purchasing applications dropped 3.3% versus last month’s increase of 4.4%. New home sales came in at 342,000, less than the expected 370,000. Crude oil inventories dropped 3.9 million barrels, more than last week’s 400,000. On Thursday we get jobless claims and durable goods orders.
OTHER MARKETS
We’re on a buy for bonds as of Jan. 12.
We’re on a buy for the dollar and a sell for the Euro as of January 26.
We’re on a sell for gold as of January 21.
We’re on a sell for silver as of January 21.
We’re on a sell for Copper as of Jan. 12.
We’re on a sell for crude oil as of January 21.
We are long term bullish for all major world markets, including those of the U.S., Britain, Canada, Germany, France and Japan.
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