Reply #1: WrapUp by Martin Goldberg "They’re At It Again!" [View All]

[ozymandius]

A Morning star for Bonds, Heavy Volume With Little Upside Progress for Nasdaq
They’re At It Again!

Deals were the name of the game today. Deals and positive economic data from the government moved the bond market to the downside while all the deal news didn’t do much for stocks. In the precious metals front, Glamis Gold (GLD) put out a bid for Gold Corp. This moved Gold Corp. up over 7% and Glamis down by over 7%. In a similar manner, the proposition that Symantec (SYMC) would buy Veritas (VRTS) became a reality today. Both of these stocks were down – Symantec down by over 7%. With all of the deal-doing going on, I think it would be meaningful to keep mental or actual notes on those companies that are doing deals in spite of what Wall Street thinks about them. This may show a level of corporate governance that suggests that management will do whatever is for the long-term benefit of shareholders, while suffering the long term pain of a one-day big loss in paper stock price. When a bear market comes (is this even possible?!), such companies are worth a look based on valuations when the time is right. Consider that in 2000, AOL shareholders became owners of a real and thriving business, whereas if AOL had stood pat, they would have become a single-digit stock. Or would they have?

I actually got a note from a successful trader suggesting CMGI as a potential buy, and as shown below the chart is rather bullish. They’re back!

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Today’s Market

Stock indices were little changed, and the only thing different about today versus the last few trading days was the breadth of today’s market, which was a bit negative. The Nasdaq has traded on extremely heavy volume for the last 11 trading days, and yet has not produced any significant upside. We’re very near a 52-week high with a lot of fuel (volume) being expended with practically no upside.

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There are two points I would like to make about the 10-year note:

The head-and-shoulders that failed does not mean a sustained uptrend will follow. It mostly suggest(ed), a “tradable rally”. Edwards and Magee (no time to give chapter and verse), indicate that the head-and-shoulders, even if it fails, tend to indicate impending peril.

The most recent (3 days) as indicated in the 7-10 year bond exchange traded fund produced an evening star pattern. Although we could get a bounce, the odds favor a short-term downtrend with 86-and-a-few pennies top to hold in the short run.

Looking at the longer-term pattern expressed in interest rates, it seems easy to believe what the fundamental bond bears are saying about interest rates – they are going up!

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