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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