DJIA & NASDAQ Uptrend..Is it for real?

Posted by Kris | Sunday, May 04, 2008 | | 0 comments »

For the past few trading weeks since the earning season, the DJIA has been growing in strength from its low of 11634. Nasdaq and financial are leading the rally as most analyst thinks that both this sector were unfairly undervalued. The optimistism were so high that you can start to see the commentors & analysts from financial channels like MSNBC starts to give an impression that the US economy suddenly starts to recover from post recession and a bottom has been formed even though the price of gas is soaring like crazy. A month ago , they were so bearish on everything except on commodities play that you can see clouds hanging over their head. Their opinions tend to lag the market movement and just for FYI information as they cannot read the market at all. They switched their opinions as fast as you press the button to change the channel.

Now with the stock rally, commodities like Gold, wheat, are in a downtrend with the exception of oil & Natural gas which is seems to defy gravity everyday. I am sure that this will make the US consumer sigh and cry as their gas expenditure to take a huge bite out of their disposible income. ( The prices at the pump gained like >USD0.20 cent a gallon in just a short period of 2 months in the US) US dollar is gaining strength with the rally even though the FED is aggressively cutting interest rates. The "conventional theory", for now at least is that all the money from the commodities are pouring back to the stocks thus sparking the rally.

Google sparked the early earning rally as they outperformed Wall Street's expectation followed by bellweather tech names like Intel & Apple Inc. After that, everything were so sunny for the stock market even though a lot of bad news from job employment, house sale are coming out. If the earning game were not that positive, this barrage of negativity will surely drag the DJIA to new lows. Early DJIA intraday losses were easily recovered during this few past trading days. So it does not make any sense to fight this strong uptrend wave at least for now.

I bet alot of people are waiting for the "coming" plunge to break this incredible rally. In my opinion, fear is much much more powerful than greed, thus more profitable by shorting. :) That is my 2 cent though.

So the real question is that whether the rally can bring DJIA to new high or a prelude to a bigger plunge? Don't worry they (the analyst, tv) will always be able to come out with an excuse or "too late" explanations on this and that happened.