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The Wilderhill Clean Energy Index has bottomed and is starting to make a run toward 190.
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The Philadelphia Oil Service Index (OSX) continues to gyrate near the 180 area.
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The Amex Oil Index (XOI) is back above 1100.
Technical Summary:
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Momentum Still Evident
The stock market continues to act well, with the technology stocks starting to add somepop to the Nasdaq, and the small stocks coming alive last week.
The NYSE advance decline line confirmed the latest round on new highs on the majorindexes, although the media hype for Dow 12,000 remains worrisome.
Resistance for the S & P is near 1700, and 2350 or so for the Nasdaq.
Financial stocks have slumped slightly lately, as bond yields have started to back up.
Biotech stocks continue to act better than other areas of the health care sector, whilesemiconductor and related stocks continue to act well.
The key is to remain focused on the fact that this is a momentum market, and that momentummarkets can be very treachearous. And this one, like each and everyone of itspredecessors, will eventually fail.
Thus, our strategy remains both stock oriented, as well as mindful of the overall trend inthe market.
What this means is that every position still needs to be reviewed on its own merits. Sellstops should be meticulously adjusted. And sell rules should be observed with no deviationfrom comfort levels.
Oil Bottom Seems In Place
Crude oil seems to have bottomed out, although $60 remains important resistance.
Natural gas is still hugging the $5-$6 range, although record supplies are likely todampen any price moves to the up side.
Gold is still testing the $580-$600 band.
Check our energy section for bond, gold, dollar, and currency recommendations.
What To Do Now
The key to success remains to review each open position individually on a daily basis. Ifit’s not working, it’s time to sell it.
Weak stocks should be sold, and strong stocks should be monitored for growing signs ofweakness.
Remember, our Fallen Angels portfolio is designed for those seeking a potentiallydiversified portfolio with a longer term time frame, and offers both long and shortrecommendations.
Check all our sections daily. See tech, biotech, Fallen Angels, and timing systems forthe latest adjustments. Our ETF trading systems for energy, Spyders, Small Caps, andtechnology have also been updated.
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Sentiment Summary:
No Sell Signal From Options Yet
Thursday's rally eased worries in the options market, but Friday's action saw no excessiveoptimism, both signs that the rally still has legs.
The CBOE Put/Call ratio checked in at 0.84. A consistent string of low readings can be asign of excessive optimism and often signals a top in the markets. Readings below 0.5 areof concern, but not as serious as readings below 0.40. Readings above 1.0 are bullish. Thenumbers cited here are meant to be evaluated on a closing basis.
The CBOE P/C ratio for indexes checked in at 1.30. Numbers above 2.0 as the market sellsoff, often lead to rallies. Readings below 0.9 suggest too much bullish sentiment, just asreadings above 2 are usually required to mark major bottoms.
The VIX and VXN had readings of 10.75 and 17.83. A fall near or below 20 on VIX and 30-40on VXN is considered negative, a fact that is usually confirmed when the volatilityindexes begin to rise. Readings above 40 and 50, respectively, are often signs that abottom may be close to developing.
The Duarte Overbought-Oversold Gauge (DOOG) fell to 75 from 85. This remains an overboughtmarket, as the sell signal from 10-9 is still in play.
NYSE insiders were buyers of stock for the week of 9-29-06. NYSE insider short sales arestill at very low levels. When NYSE specialists raise their short sales, and sell stocks,risk increases dramatically. There is a two week lag for these figures.
Market Vane's Bullish Consensus checked in at 72% on on 10-13-06. This is the fourth weekabove 70%, which is a sell signal.
Market Moves
Lam Research And IBM Boost Tech Indexes
Lam Research (Nasdaq: LRCX) and IBM (NYSE: IBM) made new highs on 10-13, boosting techrelated indexes.
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Lam Research and IBM, both members of our Fallen Angels portfolio, delivered nice lookingbreakouts on 10-13.
Lam, a wafer fabrication equipment manufacturer to the chip industry, gained nearly 7% onFriday, after delivering a stout earnings report.
This was Lam's fifth straight quarter of revenue and earnings growth.
The rally took the stock nearer to a test of key resistance at 53.75.
IBM moved higher on expectations of $3 billion worth of sales on its newly developedtranslator software, which is expected to be shipped to Iraq soon.
Big Blue is within 3-5% of key resistance near 90.
If these two stocks can take out key resistance areas, we could see an extension of theirrun.
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The Amex Biotech Index (BTK) broke out last week, taking out the resistance at 700, andhas continued to move higher.
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The Amex Pharmaceuticals Index (DRG) is still consolidating, after it broke out to a newhigh on 9-1 and has been consolidating ever since. 350-355 is the key range.
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The Philadelphia Semiconductor Index (SOX) looks poised to start a major intermediate termmove.
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Small stocks are starting to show signs of regaining momentum.
