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November 08, 2005
A contrarian item and various stock charts
Good Day! I am starting out with a contrarian item suggesting that too many advisors are bullish. Contrarian thinking is a tool, but one should not ignore the price chart or the obvious. The gaps from last Thursday are holding and there is no sign of weakness in the Nasdaq yet. The rest of today’s post features selective stock charts. Have a good trading day.
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Mark Hulbert of CBS MarketWatch reports the following: “As of Monday night, the HSNSI stood at 39.2%. As recently as mid October, it stood at minus 30.1%, which means that at that time the average newsletter editor that is part of this index was recommending that his clients allocate nearly a third of his equity portfolio to the short side of the market. In just 17 trading sessions, in other words, the average short-term market timer has increased his recommended exposure by 69.3 percentage points. This is hardly the stuff of which walls of worry are constructed.”
Wow, that is certainly a huge jump and no doubt has a lot to do with the bullish cycle that is upon us (Nov-Dec rally, January affect, October surge). Why is sentiment viewed as a contrarian indicator? Because those who are bullish have already bought and there are fewer buyers left to fuel an advance. This is why the wall of worry is bullish. It means that there are plenty of bears or hesitant bulls do buy and provide fuel for an advance.
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AESI formed an island reversal on 2-Nov and moved higher with good volume yesterday. This company is in the "threat detection business" with prospects for a government contract. The reversal and breakout are bullish, but this is not for the faint at heart.
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ELN is creeping higher and managed to break the upper trendline of a falling wedge. This stock is dependent on Biogen Idec's Tysabri, which Forbes thinks May Return To Market In 2006
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FILE broke triangle resistance with an advance over the last six days.
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AMAT formed an island cluster reversal (blue circle) in early November and the 3-Nov gap is holding. Upside volume was good and a break above 17.5 would d be bullish. This stock was also featured in Barron's CASH RICH article over the weekend.
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INTC broke the July trendline and mid October high with a gap and four day surge. However, volume was not impressive and I would expect another support test.
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CPRT is making its second bounce off support with big volume and a move above 25 would break triangle resistance.
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JBLU moved higher on good volume. I wonder about this stock because it has lagged the airline group and Dow Transports. Upside volume has been good lately and there are two levels to watch for a breakout: 19 and 20.
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OATS is finding support near the April consolidation and bounced on good volume the last two days. This is a turnaround story and the bounce affirms support at 10.5.
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Posted by Arthur B. Hill at November 8, 2005 06:41 AM