The Chicken or the GAGA

February 21, 2011

Weekly Market Outlook

By Keith Schneider


GAGA-GOOGLE

As the Mid-East revolutions gained steam and a massive budget deficit unveiled, Lady Gaga took center stage and received most page views of almost any news topic. She topped 1 billion video views this week. Meanwhile, the market continues its steady rise.

And just to remind you that MarketGauge is constantly developing new market indicators as the world morphs, our latest innovation is the GAGA-GOOGLE indicator. We take the current price of a front row ticket at the latest LADY GAGA concert ($2200), divide that by the current price of GOOGLE stock ($630), and then smooth that over the last 9 days. Our resulting conclusion is that GOOG and NASDQ stocks are still undervalued. Here is where social phenomena and stock market behavior merge. Tulip Bulb mania anyone?

Now let's look at some old-fashioned indicators to see what's really happening.

SPY (S&P 500), DIA (Dow Jones), IWM (Russell 2000) and QQQQ (NASDQ 100) Indexes

The daily phases for all key indexes are most bullish. The moving averages are all accelerating to the upside. The response to bad news has been great market action. Below is a chart of the DOW on a weekly basis. There is a lot of interesting things to gleam from this. First, we are approaching a 100% move (double in price) off the lows since the financial meltdown.

However, we are still 6-7% away from this target. Key resistance comes in at around 130 (another 500-600 points in the INDU), where the last rally failed before things came apart at the seams in 2008. Also, note how the 50 week moving average crossed the 200 week for the first time since the meltdown. These convergences bear careful attention. As always, keep stops in place to lock in profits in this already extended bull move.

DIA Chart

Market Internals

VIX (sentiment): This sentiment indicator is clearly in the middle of its trading band and shows no signs of irrational exuberance. Firmly bullish!

VIX Chart

Accumulation/Distribution Volume: We see no signs of selling from the large players, although volume is light on this leg up.

McClellan Oscillator: (advancing/declining issues) Not much has changed in our intermediate term reading of this breadth indicator. Not overbought, but clearly sitting in the upper regions, therefore giving plenty of room for the market to move either way. I give this a neutral reading.

Sectors

Gold (GLD) and Silver (SLV): Silver staged a most impressive rally, making new all-time highs for the move up almost 3% on Friday alone. Meanwhile, GLD has staged a decent rally and is changing phases back to bullish, but still lagging and well beneath its highs. Silver looks like there is no stopping it for now. This is a most interesting divergence, as generally Gold is considered the go-to currency in time of geopolitical uncertainty.

Opening Range Strategies and Hotscans

VFC (Quick AM Trade): On Friday, we traded VFC (VF CORP) as one of our quick AM bullish setups. This was highlighted in both our focus list in our live trading room and in Mish's Daily Trade. Again no pain, as within a few minutes we attained our initial profit objectives, and those position day trading received almost a full ATR by closing the trade by end of day. The chart below show the classic setup. Notice the pattern of the FTP midpoints, which is highlighted by the up arrows.

VFC Chart

Stay One Step Ahead of The Markets and Profit
From The Current Volatility With Market Outlook

Keith Schneider

Every week you'll gain actionable insight with:

  • Unique analysis of themes driving the market trends, so you stay of the right side of the trends
  • Powerful inter-market analysis that reveals market turning points early
  • Big View charts and indicators that identify dangers and opportunities
  • Highlights of the most important economic trends, so you're on top of the news flow
Subscribe Now!
Geoff Bysshe