I wouldn’t get complacent about this rally but it passed some milestones yesterday and today (March 9) that argue it has some more room to run.
Here are the positive signs:
- In the final hour today volume picked up. That’s a huge positive because if a rally is to continue more investors have to participate as prices go higher. Falling volumes, which the market saw on Monday, indicate that investors are stepping aside as prices rise. Higher volume at this point in a rally—this move upwards dates from a low on February 8 at 1057 and as of the close today now totals 7.9%–usually means that some big institutions have decided that stock prices show enough upside momentum for a buy.
- The NASDAQ Composite Index has broken above its January 19 high of 2320 to close at 2341 today. Technology stocks are usually a key sector leading any rally so a new high from the technology-heavy NASDAQ is a big plus here.
- The Dow Jones Transportation Index closed above its January 11 high of 4263 at 4269 today. Much of the recent strength in the index has come from railroad stocks, which tend to move up when investors believe that economic activity is picking up. The Dow Jones Industrial Index often follows the Transportation index upwards.
Don’t get carried away. This is a time to let what you already own run higher rather than placing big new money bets. We’re in March—which means we’re looking at the end of the strongest six months of the year for the stock market in May and the beginning of the weakest six months.
This rally might also be a good time to sell anything that you’ve been holding onto hoping for a recovery.
I don’t think we’re looking at a crash or anything of that magnitude in the months ahead but do remember that this rally isn’t built so much on good news as it is on relief that our worst fears—a default by Greece, a meltdown of the euro, a contraction in economic growth in China—have turned out to be over blown.
catengineer,
Don’t get me started on Europe and California…
Jim & YX,
I thank you both!
Ed and others:
I enjoy many of you multi-commentators and often find your postings interesting and even useful. It’s all part of “Juback experience”. If anyone doesn’t want to see any comment, simply skip it and spare the rest of us.
Just a word on my attitude toward posting comments. As long as it’s posted with respect for others, as long as it is an attempt to share useful information, as long as it is an honest question, as long as its an attempt to share a feeling or a joke, then the more the merrier. My ability to post varies wildly with the swing in my work load. And I appreciate the efforts that everyone has made in the first 8 months of this blog to make this a useful community. I’m very impressed with you all. Thanks.
Ed,
Now you see how it feels to be Europe and California….everybody’s trying to run you off too =)!!
amtrend10, you raise a very important issue: what is real and honest for a company?
For banks, they have to assess risks and can make their results look completely different when they choose to mark down an “asset” by 10, 30 or 70%.
For other companies, there is stock valuation, trademarks, customers accounts…
Boils down to the fact that, even without cooking the books, managements can make profits look widely different as needs be.
Ok guys, you’re making me blush…
mopama,
I don’t believe there is any one “perfect” investing method. Different methods have worked at different times in the past.
For example, I still remember my dad telling me to never buy a stock with a P/E greater than 15. While it’s not a good rule anymore, I’d still call it a good guideline.
Ed,
Keep your responses coming for all the reasons others have already stated. If people don’t want to read your opinion they can scroll past. While I come to this site to read what Jim writes, I enjoy your input as well other’s.
Ed,
As you know I keep a longer time horizon in investing since I have 20+ years before retiring. In my case, that time horizon is more or less 60+ years. ;-). For that I really need to monitor so many summers.
That said, sometime I play different kinds of investing methods with a smaller account, just to have fun and validate some of my personal or borrowed opinion(s) on the market/stock and similar.
To ALL,
I am for sharing ideas through comments.
I have *full* trust and *high* respect for Jim.
People forget really soon.
I believe it was very smart for Jim to make the investment calls he made and continues to make. I spare you to fill in the blanks for what we experienced during this Great Depression – we ALL know – and who don’t than is a ‘blind’ investor. So many things could have gone wrong. Mind you so many thing could STILL go wrong. We are not over yet. We all have to just wait before judging on someone else ability to ‘see’ further. Oh, and in my full trust on Jim, it does help having following him for so long. Last but not least Jim always fully motivates his investing ideas. People are free to agree or disagree.
I very much respect and appreciate EdMcGon’s commentary. Like other contributors, he provides an excellent additional perspective on what is happening in the marketplace. The plain fact is that Jim replies only occasionally to reader questions. I appreciate any help I can get in trying to make sense of the volatile world of stock picking. Thanks again Ed!