Wednesday, January 26, 2011

Get ready for another push above 12K

Yesterday I wrote that the assault on the 12K level might take a few days and indeed today the Dow sent out a scouting party to explore the territory, reaching a respectable 20 points behind enemy lines at 12,020.5 before retreating to close at 11,985.4. So we have two doji days and the State of the Union and the Fed meeting out of the way. Now we can get down to business.

The past three sessions have established 11,980 as new support. The psychological 12K mark is still resistance but I sense that the wall is starting to crumble. With the ES and YM futures both up over 0.1% right now (1:15 AM EST, the pivot point having risen another 10 points today to 11,954 and the VIX still having room to fall before reaching its lower Bollinger band at 15.73, I see another attack on the 12,000 mark in the works.

We remain in the upper reaches of both the daily and weekly regression trend channels, so the swing trend remains upward. Once we cross the 12K level on a closing basis, there is no further meaningful resistance until 12,891, set all the way back in April of 2008 and the high of that year.

The only question left is when is this correction coming that everyone is talking about. The current rally is now 9 weeks old. Every other rally since 2008 (a year which saw no rallies at all) has lasted between 9 and 11 weeks. So I'm going to give this one another week or so. In the meantime, I'll be watching carefully for signs of toppishness. The RTC I use will not call the exact top but it will indicate with 95% certainty whether any decline is a trend change or just noise in the system.


My Intel (INTC) play from last week is perking along nicely, gaining almost another percent today to close at 21.75. Its daily chart posted an ominous looking evening star today, but the weekly chart is still looking good, so barring disaster tomorrow I'm going to let this one ride a bit longer.

Today we welcome two new names to the low price/high yield portfolio:

ZTR, Zweig Total Return Fund Inc., currently yielding a juicy 11.25%. I'm in at 3.53; it closed today at 3.52.

ARR, ARMOUR Residential REIT, Inc., which yields a whopping 18.58%. I bought at 7.73 today; it closed at 7.75.

I won't bore you with the complete technical analysis here but both of these names have been in decline and are now looking fairly oversold.

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