Taking a look at the (market leading) small caps (IWM), its pretty clear that something violent has just happened. Stocks were in the midst of a healthy correction (pennant pattern) and finding support at the rising 200 dma in late October. After a shaky bounce IWM got slammed through its 200 dma but ultimately reversed in a V-bottom-like pattern retaking its 200 dma. Recently the CCI and stochastics have given buy signals and now that IWM has regained its 50 dma I see nothing but pain ahead for shorts in the coming weeks:
While most people point to the poor performance of former market leaders (like AAPL and GOOG) new leaders are emerging. Take a look at FB over the past few weeks, the rally is relentless and on strong volume. The ~3.5 month base is really paying off now:
Whether they are new leaders or just heavily shorted stocks getting squeezed (shorts fear higher taxes in 2013), 100%+ gains in popular stocks like FSLR, GMCR, and RIMM over the past six months makes for some very positive sentiment. FSLR seems to be just getting started after breaking $26 last week. It should see ~$32 by Christmas:
Shorts seem to be panicking on GMCR as it has soared 100% on huge volume spikes:
RIMM, the stock that everybody loves to hate, bulls sure aren't hating it right now. Volume has been through the roof as RIMM surged above its 200 dma (declining):
The point is, despite all the negative press lately about the "fiscal cliff" stocks have rebounded very strongly from the November lows and appear to be starting a new leg up. While many stocks have struggled lately, others have been exploding higher (see above). I'd be surprised if we don't see a continuation of the recent rally to new 52 week highs on the indexes by the end of the year. Happy holidays to all!
Disclosure: I am long IWM calls and FSLR stock.
PS. I see all solar rallying strongly here (I am long TAN, SPWR, JASO, ASTI, ENPH, MCP also)
3 comments:
Finally wait is over and found some new article in your blog.. the topic of your blog is really nice and modern which helps many people.. thank for share looking for your next post.
Sorry for the delay, I've been busy with other things. I will try to start posting more regularly again.
Great post
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