Thursday, October 15, 2009

A new bullmarket in NYX - the New York Stock Exchange

Here is an image of the front page of today's New York Times. At the top left you will find a story about the New York Stock Exchange. It tells us that the exchange has fallen on hard times because of new competition from electronic markets and it generally paints a bleak picture of the NYSE's future.

At the top of this post you will see a weekly chart of NYX, the common stock of the NYSE-Euronext, the parent company of the exchange. The panic of 2008 was not kind to NYX - the stock had lost more than 80% of its value at its low point in March of 2009.

Here we have a classic contrarian combination. A devastating drop in a stock coupled with a bearish front page story about the company in the New York Times. Icing on the contrarian cake is the fact that the 200 day moving average of NYX (red line on the chart) has turned decisively upward in the face of a lot of bad earnings news.

I think NYX will move much higher during the next fifteen months. A reasonable expectation is midpoint resistance that stands near 74 (purple dotted line).

Wednesday, October 14, 2009

Dollar is scraping bottom

Here is an image of the front page of today's Chicago Tribune business section. I think it shows that bearish sentiment about the U.S. dollar is pretty extreme. I think that the 75 level in the dollar index will prove to be strong support. The next big move in the dollar will be upward from here and should carry the dollar index to 100 or higher.

Monday, October 12, 2009

Shanghai Update

Here is an updated daily chart of the Shanghai Stock Exchange composite index. I last commented on this market here.

As you can see the drop from the from the early August high ended in early September, just about in the target area I had highlighted (purple oval). That target represented the confluence of the rising blue trend line and midpoint support denoted by the horizontal red dash line.

I think a move to new bull market highs for this index is about to start. It should carry the index above the 4000 level before another substantial break begins.

Climbing the Wall of Worry

Here is an image of the cover of Time Magazine's latest issue. I don't think it has any immediate implications for the stock market's trend over the next few weeks. But I think it does accurately reflect (and reinforce) the public's current attitude towards stock market investing. The stock market turns people off - largely because of its very negative performance during the panic of 2008.

This cover story reinforces my conviction that the "wall of worry" that the stock market climbs during a bull market is a solid one and extends much further upward from here. We won't see covers like this one near the top of the current bull market. This top is not likely to develop until late 2010 and I think it will return the Dow and the S&P 500 to within whispering distance of their 2007 high points.