Restrained Rally Slowly Emerging
To anticipate trading over shorter periods, I rely on both the market's internal quantitative data as well as other technical signals. These have been modestly encouraging, with only a few exceptions -- including weak market breadth, which Helene Meisler has examined in detail.
This buying juncture is not ideal. Although it hasn't fully gelled yet, I am becoming increasingly more comfortable shifting toward a bullish posture, for however brief a time period that may be.
I would become even more aggressive if not for several fundamental factors that counterbalance these quantitative improvements. These include more restrictive monetary policy and increasing fiscal budgetary pressures, which suggests a rising likelihood of either higher taxes or less deficit spending, or both.
Despite this not-quite-perfect floor, most of the elements are slowly coming together to support at least a modest year-end rally. My analysis suggests that traders and index buyers can get long over the next few weeks, with a projected top in mid-December.What's the basis for this? My key positive factors include:
|Going to Extremes
The spike in Nasdaq 52-week lows has reached levels that in the past have been good buying junctures.
|Click here for larger image.|
|Source: Redwood Technimentals|
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