Sunday, September 20, 2009

Becoming Cautiously Bullish

This weekend I turned bullish based on a several factors I have been tracking. However, given the volatilityof the past year, I will still be cautious about putting money back into the stock market and, therefore, be doing it slowly. Here are the factors that I consider favorable for a bullish stock market.
  • Values above the 10 month EMA. Over the summer, I read an article, A Simple Money Management Idea for Stock Traders at The Time and Money Report blog, that reported when the value of the S&P was above it's 10 month exponential moving average, the market advanced, and when the price was below, the market fell. The S&P value is now above the 10 month EMA again, as are the price of many individual stocks that I track.

  • Dow value is near a trigger. In January, 2009, when I thought that the bottom had happened or was near, I set triggers for putting more cash in the market at a Dow 6000 or Dow 10,000. At 6000, I thought there would be no confidence in the market and at 10,000, I thought confidence would be relatively good again. Last Friday, the Dow closed at 9820.

  • Interest rates will be low for a while. In the 1990s, low interest rates created a rapid advance in tech stock prices. In the 2000s, low interest rates caused a significant advance in housing prices. The current low interest rates will create another boom somewhere in the economy.
  • Finally, there is still much skepticism about the current market rally, which has caused significant amount of cash to remain out of the market. As the market continues to advance, I expect this money will come back into the market as investors become concerned about potentially missing the next bull market.

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    This is not financial or investment advice. Please consult a professional advisor.

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