Please Read: Market looking to rally here

[HenryTo]

Looks like market is trying to rally here. FYI, I don't think the market will crash this year, but it is going to be a difficult market and we will have to be very selective in going long. I will give you guys more details tonight but the sectors I will avoid is:

* Commodities
* Homebuilding
* Financials

The brand name stocks certainly look very compelling here. Stocks such as YHOO, EBAY, SBUX, KO, etc., etc. As you can see, I really like large cap growth here. I also like Big Pharma.

For now, our DJIA Timing System remains neutral but I think the brand name stocks are VERY, VERY COMPELLING here.

[Gizmo]

I'm not buying it yet and in fact shorted the Ndx at Friday's close. So far, this rally phase looks like a bear market/short covering bounce. I have it as short term overbought with the slow stochs above 80 and RSI 5 above 70. Also negative diveregances are appearing on the 15 and 60 minute charts. Waiting to see if a higher low is put in off what I believe will be a trendline reversal this week. Looking for support @ 1427-1430 to be tested.

http://www.msnusers.com/_Secure/0PwAAAAgTbV*YGzkOANznPspyzrXToDa2BUTKMtDeaK6DTEC9KKW0TP9mZsUMUGRcVusMAYrN6Z!O3w7DzkdbiEG!dFj54VNq/what.jpg?dc=4675521269881162211

Negative divergences (was not resized so will load slow on 56k modem)

http://www.msnusers.com/_Secure/0QQCz*9YT4ZJsZIX8ksjcBQzv3REovdpOCsrE4XGpv*aeFcpXXFrWYM!E6W*XmSn*ri85qOZgiyqA32LQg0ohnk5AFEadN45VIDSHefwx1XA/waning.bmp?dc=4675521266381532187
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Gizmo

[HenryTo]

nodoodahs,

Yes, I am looking for a rally to last two to three months (it has probably already started) - and possibly more if we are lucky. This is the shortest-term I'd go since I am not a good trader by any means (as evident by the GM and F downgrade right after our "buy signal" on the DJIA).

I agree that there are values out there - but they are just immensely difficult to find. Care to share some of your thoughts on those? I am trying to get an acquientance of mine to write up some analyses on certain individual stocks that he likes. He is basically a bottom-up value guy and a huge fan of Warren Buffett (he just attended the shareholders meeting at Omaha). Hopefully, that will add a different perspective to our commentaries and content. Value guys like you and him keep me honest to a certain extent.

Henry

[nodoodahs]

Hmm. My time horizon is different, I am assembling a portfolio (11 at current) with a 1 to 3 year projected holding time. I agree the "market" as defined by S&P 500 or DJIA is overvalued and due for more downward or sideways direction over the next 5 to 10 years, but I am willing to bet some of my own money that there are values out there.

One main thing I wanted to get out of your post was a disclosure of time frame. I believe that one of the least discussed items is projected holding time. Is it correct to say your contention for the glamour brands you mentioned is a move up, in the next 0-3 months, lasting less than 1-6 months?

[HenryTo]

nodoodahs,

You can say that - but one reason why I found the major large cap brand names as compelling is that "large cap growth" as an asset class is severely oversold - relative to other asset classes (including international, small caps, junk bonds, etc.) over the last 12 months (based on mutual and ETF fund inflows/outflows data). Moreover, any rally in the major indices from here should involve names that I just mentioned, as they are well-established companies with relatively consistent earnings or consistent earnings growth.

I heed your point - and I would also like to buy these kind of stocks here at cheaper prices. If the bear returns anytime soon, these stocks will definitely take a further beating but for now, I think these prices will hold and should be higher within the next several months. Eventually, values will come back but I think it may take another five to ten years for that to happen.

All the Best,

Henry

[nodoodahs]

Stocks such as YHOO, EBAY, SBUX, all WAY overpriced IMO. Looking at 30-50 times earnings, with market risk. Unless you subscribe to the "a bigger fool than me will buy it later" theory, why not buy a 6-month T-bill at 3%. That's only 33 times earnings and risk-free.

[HenryTo]

Our DJIA Timing System is now 100% long at 10,395.

This just in: AAII bulls-bears% differential at negative 16%. We are either going to crash here or we are going up in a significant way. I vote for the later - at least for now.

Henry

[HenryTo]

This just in: The latest Investors Intelligence Survey shows 43.5% bulls and 30.4% bears - giving us a bulls-bears% differential of 13.1% - a still-further decline from the 14.3% reading that we got last week.

While this was not the sub-10% reading that I have been looking for, I think this reading is good enough for a ST bottom here.