While US Indices are in Uptick ..What’s Next

The recent short term selloff in Jan ‘08 resulted in kind of a capitulation around 23rd Jan.. and the uptick happened right when I predicted could be good support levels. The markets have already bounced 5~6% since this short term bottom.

On the upside sometime in Feb-Mar, the following US indices are likely yo topout before further continuting their reversal to imminent fundamentals of the economy. These points would offer good Exit stock positions:

SP500 : 1420~1430
DJIA: 13100~13200
NASDAQ: 2500~2550
NYSE: 9400~9600

These levels are basically resistance points determined based on : short resistance lines on the top side and long term support lines that were broken in Jan and would now offer as resistance points till markets recover back.
This also means another possible 4~6% further upside rise is possible from here. That’s it.
So I advise readers to keep a watch for these points and to exit any speculative positions and hedge Long Term positions at these points. Being careful and not getting greedy will be key at these points.

========== My Stock Diary notes in mid Jan while market was correcting ==========

Jan-18-2008
Since this next few months/year it is a down trending market (with in between upticks). Personally, I think, in the short run.. I expect Indices to touch these levels on the bottom side:

DJIA : 11800~12000
NASDAQ: 2250~2300
S&P500: ~1350
NYSE: 9200

At these levels, I shall again consider looking at technical indicators on the indices, before thinking that short term oversold levels for another re-entry have arrived or not. Till then markets are a risky bet.

This year will be marked in history as a year of capital preservation (to keep value of capital safe) so play it accordingly.

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Human Reaction to Market Cycles

Folks,

Here is an interesting slide that captures how typical Investors React to Market Cycles.

Also explains why playing contrarian and buying value plays to Long Term advantage.

Enjoy.