Could This Be … A Bear Market Rally?

Nice little 3-day winning streak we have here.  From our intraday low of 666 on the S&P 500 (^GSPC) on Friday, we head into Friday the 13th with some hopes for a bear market rally to continue.  There are many technical factors working in favor of this.

1. Stochastics crossed over the mid point
2. Fast line crossed over the signal line in the MACD
3. Volume is decreasing, but it is still higher than during most days of the recent sell off

At the current level, we are right at the November lows.  This is the first resistance that we will need to push through.  Should the rally continue, there are several other significant resistance levels to watch:

1. 800 - January lows
2. 825 - heavy volume at this price area
3. 50 day moving average

Any of these could prove to be the end of the rally.  But it sure is nice to wonder how long a rally will last instead of when will the market stop going down.

This CNBC video discusses the nascent rally.  The analyst discusses several fundamental reasons that it will continue

1. too much cash on the sidelines and this will come into the markets - not sure who’s cash he’s talking about but it’s out there I’m sure
2. ISM manufacturers is forming a base - his words
3. There was positive news from BAC and C to be profitable this quarter

He thinks the rally could continue until end of April.  The end could coincide with the release of Q1 earnings that are not expected to base until later in the year.  I also predict this could coincide with one of the levels I mentioned above.

The next part of the video discusses sectors which may be right to buy now.  He likes companies with hard assets and high book values.  He mentioned a company - Commercial Metals (CMC) - trades for $11 and has a tangible book value of $13.  Fundamentals aren’t my thing, but the story is good.

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