Dreaded September? GMI: +3; Stocks show strength; Katrina-induced lower interest rates?

Well it’s September and everyone expects a difficult month. So, guess what?  Do you really think the market will accommodate mass opinion?  I hate to say so, but I think this market is turning.  Declines do not begin when the news headlines shriek of calamity, as they do now.  Did you notice that the market is holding in the face of all of this bad news?  I think that means the selling is over, for now.  I am selling my puts and looking to buy.  Of course I will only begin to wade in and will wait for the GMI to give a definite buy signal. Gmi831  But the GMI moved up again Wednesday, to +3.  The IBD Growth Fund Index is now just above its 50 day average.  And would you believe 248 new 52 week highs on Wednesday!  Many stats improved: 25% (+4) of stocks are in a short term up-trend and 53% (+9) are above their 10 week average.  Between 80%-84% of the stocks in the Nasdaq 100, S&P 500 and the Dow 30 advanced on Wednesday.  That makes two out of the past 3 days that about 80% of stocks rose.  The QQQ and the SPY are now above their 10 day averages, the first sign of a possible reversal.  The percentage of stocks within 5% of their 52 week highs rose to 27% (+7).  It may be time to look at stocks near new highs again.  Speaking of new highs, both HPQ and  MSFT, which I noted in my prior post, advanced on Wednesday.  And many of past year’s winners are showing new signs of life:  HANS, FTO, BTU, CCJ, CAT BMHC, ACR, ATVI, ADSK, DNA, CELG, ALKS, CVH, BBH.

I am not embarrassed to change from bearish to cautiously bullish.  Each day provides new data, and when the indicators change, I must turn on a dime–no pride is involved.  The idea is to make $$, not to be right. A big ego is lethal in this business—in all business……………

The pundits are saying that bonds are rallying (and rates are falling) because the Katrina catastrophe will reduce future economic activity. Tlt831  However, the following chart of an ETF (TLT) that tracks the 20 year bonds, shows that long term bonds were rising, and rates were falling, since August 9, long before the hurricane.  Unless we believe that prescient traders foresaw the hurricane debacle weeks before it hit, we must conclude that the economy was weakening and rates were falling long before the hurricane, and that Katrina’s damage merely intensified the pre-existing trend.  Identical patterns can be found in ETF’s that track shorter term bonds (SHY and IEF)…………………

Please send me your feedback at: silentknight@wishingwealthblog.com.

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