IRA Investing: Let the Good Times Roll

I have a tendency to constantly look over my shoulder because something might be gaining on me. But sometimes it is nice to just sit back, relax and enjoy the fun. Up until this point, at least, 2007 has been great to investors. With the S&P 500 up a little more than 10% so far this year, most people have made some good money, and some have done even better.

While I don't think this is a time to throw caution to the wind, I feel good about what has happened so far this year and about future prospects.

My long-term market indicators remain bullish. Even though there has been some minor weakening in some of these indicators, the overwhelming majority of the evidence supports the hypothesis that this bull market has further to go on the upside.

My intermediate-term indicators remained unchanged from last week. Two of my three indicators remain neutral, and the third indicator remains bearish. While these indicators could be forecasting a consolidation or correction, I consider it unlikely that any correction will turn into something much worse.

Measuring Sentiment

Most of the indicators I use to forecast market direction are sentiment measures. I believe these are more effective at gauging future price moves than attempting to arrive at some unique economic insight that was not seen by other market observers. I do most of my own data work and charting, but there are other sources of high-quality sentiment measures as well. One of these is sentimentrader.com. Lets look at one of their charts now.

The S&P 500 is charted in the upper panel. The stochastic indicator in the bottom panel measures the position of large commercial traders in all of the major index futures products and compares their positions with those of small speculators.

Click here for larger image.

This chart is shown with an inverted scale, so when small speculators have large relative positions compared with commercial traders, the readings appear on the upper band of the chart.

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At the time of publication, Moore was long American Dental Partners, Apria Healthcare, Ameriprise Financial, Amerisafe, Cal-Maine Foods, CF Industries, Consolidated Graphics, O'Charley's, Columbus McKinnon, CGI Group, Integramed America, JDA Software, Kinetic Concepts, Layne Christensen, PAREXEL, Quadramed, Scholastic, TBS International, Boots & Coots, W-H Energy Services and Warnaco, although positions may change at any time.

Richard Moore, CFA, has 40 years of experience in various facets of the investment business. He has been employed by banks, mutual funds and investment advisory organizations during his career and has also owned retail and service businesses. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Moore appreciates your feedback; click here to send him an email.