Bullish signs

My charting program was ringing its head off this morning (it has one of those really annoying “ay-ooh-ga” tones) in response to the many bullish alerts that I had set:

1. The VIX closed its gap set on 9/29/08.

2. The Dow Industrials closed above 8000. But more importantly…

3. The Dow Transports finally closed above 300, a major resistance level.

4. All of the major sectors were up today except for precious metals, oil & gas, and utilities.

5. Foreign ETFs had a good day, too, with BRIC countries at the head of the pack.

The only thing that concerns me is the lack of volume in many of these issues, especially the SPY, the S&P 500 tracking stock. Normal volume is in the 368 million share range; today only 86 million shares traded hands, about 23% of normal.

So what’s an investor to do? Well, I’d ready a buy list and start dipping my toe into the small-cap waters because that’s where my market indicator is generating a buy signal. And, when markets do recover, it’s the small stocks that lead generally lead the parade. Although precious metals have been sliding, their poor relatives, the base metals, have been forming a saucer bottom. The chart of DBB, the Powershares Base Metals tracking stock, recently broke out of its saucer base. (The BDG is very similar except that it is an ETN (exchange traded note) and is much more thinly traded.) Note the huge increase in recent volume.

Channeling Stocks Update
Today I exited four short positions at the closing price: DTV, MHP, PANL, and PCAR. No new positions were initiated.

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