The huge swings continue. On a percentage basis, the average moves per day, on a 10-day smoothed basis, are the biggest since the market bottom at the end of 2002. Such big swings are usually seen at important market bottoms. So the message seems to be that in spite of all the traumatic news and the predictions of doom, the selling has been overdone. Remember. The market is a leading indicator, so it should soon start to discount the other side of the valley.
I have been bothered for the last few weeks that the Arms Index numbers have refused to give us oversold readings when it seemed as though that was what we should be seeing. In retrospect, the index has been correct, even when we did not want to believe it. It has said it was not yet the bottom, even when we wanted it to be a bottom.
Now, though, the picture has changed. The
NYSE Arms Index is becoming oversold. Not hugely so, but enough to suggest a rally. Moreover, the AI for
Nasdaq is really extreme. It is at one of the most oversold readings we have seen in years. It is saying a good upward move is imminent. This looks like a time to be going where the crowd is coming from.
To view a larger version of these charts (in some browsers), after clicking on the "larger image" link below the chart, mouse over the lower-right area of the chart until the icon with four arrows appears. Then click on that icon.
New York Times: NYT
The newspaper publishers are starting to look as though they will move higher. Shown above is the
New York Times' (NYT Quote - Cramer on NYT - Stock Picks) chart. About a month ago, it broke out of a two-month base with impressive volume. After a pullback, it resumed the advance, but was stopped by the sudden market weakness.
Even so, the recent light-volume pullback has been well contained. I would be inclined to wait, and buy when, and if, it resumes the upward move. A stop-buy order could be used to initiate such a trade.
(To do my Equivolume charting, as in the charts that appear in this column, I use a charting program called
MetaStock. To learn more about this method, read my series of columns,
Trading With Equivolume.)
Gannett: Buy
Gannett (GCI Quote - Cramer on GCI - Stock Picks) is another newspaper publisher that appears ready to move higher. Since the first of the year, its price has been cut in half. Now, though, the downtrend line has been broken. The last three advances have been with better volume and followed by lighter-volume pullbacks, indicating the buyers are stronger than the sellers.
The recent market weakness has brought about a pullback in the stock, which has taken the form of a downward-sloping flag. A move through the upper limit of that flag will be strong signal to buy.
Lennar: Buy
Reading or hearing the business news, one would have to believe that the residential construction stocks must be the worst of the worst. But the charts are telling a different story. Two weeks ago,
Hovnanian (HOV Quote - Cramer on HOV - Stock Picks) was suggested as a buy. Now here is another stock in the same industry that looks very interesting as a buy.
Lennar (LEN Quote - Cramer on LEN - Stock Picks) has broken out impressively from a substantial base. We have been seeing volume and trading range tend to increase whenever the stock moves higher, which is a sign of strength. It seems poised to move higher, and could be bought around these levels I believe.
Ryland: Buy
And here is yet another stock in the residential construction business that looks like a buy.
Ryland (RYL Quote - Cramer on RYL - Stock Picks) moved from a downtrend to an uptrend in early August, and has worked upward nicely since then. Volume has been coming in on the advances, which we like to see.
In mid-September, it broke out with increasing volume and a widening of the trading range. Even with the dismal and erratic market action of recent days, it has not been hurt. It looks like a buy around current levels.
Dick Arms
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