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March 12, 2010, 12:01 a.m. EST · Recommend (4) · Post:
By Kevin Marder
LOS ANGELES (MarketWatch) -- Historically, on average there have been two particularly auspicious times to buy stock each year. Right now is one of those times.
We are very bullish on shares, and for the following reasons:
The broader market, best measured by the cumulative NYSE advance-decline line and the number of 52-week highs, is leading the averages higher. A market seldom gets into serious trouble when the average stock is outperforming the blue-chip issues that comprise the Industrials and S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,151, +0.38, +0.03%) . In fact, a peak in the advance-decline line and number of 52-week highs, proxies for the average stock, normally precedes a bull market top in the Dow Jones Industrials /quotes/comstock/10w!i:dji/delayed (INDU 10,622, +9.83, +0.09%) by at least four to six months, making it one of the better long-term leading indicators. That this has not yet transpired increases the probability that a bull market top is some months down the road.
It's been a year since the stock market started to rebounded and 10 years since the Internet bubble burst. Each milestone has its lessons for investors, according to Money & Investing Editor Jonathan Burton.
Sector leadership is constructive. Important broad sectors which are highly sensitive to the economic cycle, such as the retailers and consumer discretionary stocks, are showing strong outperformance. In light of this, we do not believe that the economy will experience a double-dip in the remainder of 2010.
A typical bull market does not end after just one year, but averages between two and three years, depending upon the measurement technique used. It would be unlikely for the bull market to end now after just a one-year advance, especially after the severe and lengthy onslaught inflicted by the 2007-2009 bear, whose wrath has left many groups undervalued by historic measures.
Many stocks are forming sideways price consolidation areas, known as bases. Subsequent to an intermediate-term correction or bear market, this has been our most reliable indicator of an impending intermediate-term advance for the past 20 years. In fact, during this period, we have only encountered one other instance in which the market fell apart and moved to new lows despite the presence of many stocks building bases. Especially bullish is the fact that more stocks are forming bases at present than at any time since 1999, or before.
For the intermediate-term participant, who holds a winning position from a few weeks to a few months, recent breakouts in Acacia Research /quotes/comstock/15*!actg/quotes/nls/actg (ACTG 10.80, -0.21, -1.91%) , Acme Packet /quotes/comstock/15*!apkt/quotes/nls/apkt (APKT 17.79, -0.29, -1.60%) , Agilent /quotes/comstock/13*!a/quotes/nls/a (A 33.45, -0.13, -0.39%) , Agilysys /quotes/comstock/15*!agys/quotes/nls/agys (AGYS 11.46, -0.03, -0.26%) , Albemarle /quotes/comstock/13*!alb/quotes/nls/alb (ALB 41.92, +0.52, +1.26%) , Altera /quotes/comstock/15*!altr/quotes/nls/altr (ALTR 25.01, +0.08, +0.32%) , Anadarko Petroleum /quotes/comstock/13*!apc/quotes/nls/apc (APC 72.00, -0.32, -0.44%) , Aruba Networks /quotes/comstock/15*!arun/quotes/nls/arun (ARUN 13.03, -0.26, -1.96%) , Atlas Air Worldwide Holdings /quotes/comstock/15*!aaww/quotes/nls/aaww (AAWW 47.98, -0.02, -0.04%) , Baidu /quotes/comstock/15*!bidu/quotes/nls/bidu (BIDU 555.07, +0.97, +0.18%) , Black & Decker /quotes/comstock/13*!bdk/quotes/nls/bdk (BDK 75.01, +0.07, +0.09%) , Blue Coat Systems /quotes/comstock/11i!bsci (BSCI 19.80, 0.00, 0.00%) , Cliffs Natural Resources /quotes/comstock/13*!clf/quotes/nls/clf (CLF 64.15, +3.84, +6.37%) , Cognizant Tech Solutions /quotes/comstock/15*!ctsh/quotes/nls/ctsh (CTSH 50.87, -0.14, -0.27%) , Cracker Barrel Old Country Store /quotes/comstock/15*!cbrl/quotes/nls/cbrl (CBRL 45.61, -0.12, -0.26%) , Cimarex /quotes/comstock/13*!xec/quotes/nls/xec (XEC 62.03, -0.03, -0.05%) , Dollar Thrifty /quotes/comstock/13*!dtg/quotes/nls/dtg (DTG 32.74, -0.25, -0.76%) , Dr. Pepper Snapple /quotes/comstock/13*!dps/quotes/nls/dps (DPS 34.96, -0.07, -0.20%) , Dress Barn /quotes/comstock/15*!dbrn/quotes/nls/dbrn (DBRN 26.99, +0.05, +0.19%) , Eaton /quotes/comstock/13*!etn/quotes/nls/etn (ETN 74.22, +1.68, +2.32%) , Edwards Lifesciences /quotes/comstock/13*!ew/quotes/nls/ew (EW 97.62, +0.41, +0.42%) , ev3 /quotes/comstock/15*!evvv/quotes/nls/evvv (EVVV 15.99, -0.08, -0.50%) , Express Scripts /quotes/comstock/15*!esrx/quotes/nls/esrx (ESRX 98.95, -0.30, -0.30%) , F5 Networks /quotes/comstock/15*!ffiv/quotes/nls/ffiv (FFIV 62.99, -0.75, -1.18%) , Faro Technologies /quotes/comstock/15*!faro/quotes/nls/faro (FARO 25.45, -0.23, -0.90%) , Federal-Mogul /quotes/comstock/15*!fdml/quotes/nls/fdml (FDML 19.96, +0.16, +0.81%) , Fossil /quotes/comstock/15*!fosl/quotes/nls/fosl (FOSL 38.75, -0.18, -0.46%) , Gentex /quotes/comstock/15*!gntx/quotes/nls/gntx (GNTX 20.22, +0.11, +0.55%) , Green Mountain Coffee Roasters /quotes/comstock/15*!gmcr/quotes/nls/gmcr (GMCR 92.56, +0.20, +0.22%) , Green Plains Renewable Energy /quotes/comstock/15*!gpre/quotes/nls/gpre (GPRE 14.12, -0.09, -0.63%) , Imax /quotes/comstock/15*!imax/quotes/nls/imax (IMAX 15.76, -0.10, -0.63%) , Incyte /quotes/comstock/15*!incy/quotes/nls/incy (INCY 13.05, -0.02, -0.15%) , Intuitive Surgical /quotes/comstock/15*!isrg/quotes/nls/isrg (ISRG 359.96, +2.16, +0.60%) , JDA Software /quotes/comstock/15*!jdas/quotes/nls/jdas (JDAS 28.89, -0.86, -2.90%) , JDS Uniphase /quotes/comstock/15*!jdsu/quotes/nls/jdsu (JDSU 11.46, -0.10, -0.87%) , Liberty Global /quotes/comstock/15*!lbty.a (LBTY.A 28.50, +0.06, +0.21%) , Mellanox Technologies /quotes/comstock/15*!mlnx/quotes/nls/mlnx (MLNX 20.45, +0.06, +0.29%) , Mylan /quotes/comstock/15*!myl/quotes/nls/myl (MYL 21.97, -0.01, -0.05%) , Neogen /quotes/comstock/15*!neog/quotes/nls/neog (NEOG 25.37, -0.36, -1.40%) , Netgear /quotes/comstock/15*!ntgr/quotes/nls/ntgr (NTGR 27.06, +0.17, +0.63%) , Nordson /quotes/comstock/15*!ndsn/quotes/nls/ndsn (NDSN 69.60, -0.40, -0.57%) , Plexus /quotes/comstock/15*!plxs/quotes/nls/plxs (PLXS 37.15, -0.30, -0.80%) , Riverbed Technology /quotes/comstock/15*!rvbd/quotes/nls/rvbd (RVBD 27.95, -0.47, -1.65%) , Rovi /quotes/comstock/15*!rovi/quotes/nls/rovi (ROVI 37.51, +0.51, +1.38%) , Sapient /quotes/comstock/15*!sape/quotes/nls/sape (SAPE 9.36, -0.11, -1.16%) , Shutterfly /quotes/comstock/15*!sfly/quotes/nls/sfly (SFLY 22.00, -0.03, -0.14%) , Skechers /quotes/comstock/13*!skx/quotes/nls/skx (SKX 33.22, -0.47, -1.40%) , Skyworks /quotes/comstock/15*!swks/quotes/nls/swks (SWKS 15.37, -0.26, -1.66%) , Salix Pharmaceuticals /quotes/comstock/15*!slxp/quotes/nls/slxp (SLXP 31.81, +0.93, +3.01%) , Sonosite /quotes/comstock/15*!sono/quotes/nls/sono (SONO 30.93, +0.27, +0.88%) , Trimble Navigation /quotes/comstock/15*!trmb/quotes/nls/trmb (TRMB 27.00, +0.09, +0.33%) , Viropharma /quotes/comstock/15*!vphm/quotes/nls/vphm (VPHM 13.25, 0.00, 0.00%) , VistaPrint /quotes/comstock/15*!vprt/quotes/nls/vprt (VPRT 60.52, -1.43, -2.31%) , Walter Energy /quotes/comstock/13*!wlt/quotes/nls/wlt (WLT 88.08, +1.22, +1.40%) , WebMD /quotes/comstock/15*!wbmd/quotes/nls/wbmd (WBMD 45.54, -0.05, -0.11%) , Whiting Petroleum /quotes/comstock/13*!wll/quotes/nls/wll (WLL 78.70, +0.36, +0.46%) , and Whole Foods Market /quotes/comstock/15*!wfmi/quotes/nls/wfmi (WFMI 36.13, +0.52, +1.46%) , to name just 57, are all the evidence that is needed to know that the five-week rally off the Feb. 5 wash-and-rinse day low has serious credentials. Breakouts in many of the above Nasdaq names have been accompanied by volume best described as not "middling" or "on the fence," but "explosive."
Still building bases are Agrium /quotes/comstock/13*!agu/quotes/nls/agu (AGU 72.30, +5.52, +8.27%) , Bucyrus International /quotes/comstock/15*!bucy/quotes/nls/bucy (BUCY 64.92, -0.03, -0.05%) , Catalyst Health Solutions /quotes/comstock/15*!chsi/quotes/nls/chsi (CHSI 40.70, +0.23, +0.57%) , Cavium Networks /quotes/comstock/15*!cavm/quotes/nls/cavm (CAVM 24.86, -0.17, -0.67%) , Ceragon Networks /quotes/comstock/15*!crnt/quotes/nls/crnt (CRNT 12.24, +0.13, +1.03%) , Clean Energy Fuels /quotes/comstock/15*!clne/quotes/nls/clne (CLNE 21.51, -0.87, -3.89%) , Ctrip.com /quotes/comstock/15*!ctrp/quotes/nls/ctrp (CTRP 38.70, -0.10, -0.26%) , Deere & Co. /quotes/comstock/13*!de/quotes/nls/de (DE 58.73, +1.00, +1.73%) , DirecTV Group /quotes/comstock/15*!dtv/quotes/nls/dtv (DTV 34.81, -0.10, -0.29%) , Dover /quotes/comstock/13*!dov/quotes/nls/dov (DOV 46.51, +0.10, +0.22%) , G-III Apparel Group /quotes/comstock/15*!giii/quotes/nls/giii (GIII 21.77, +0.31, +1.44%) , GSI Commerce /quotes/comstock/15*!gsic/quotes/nls/gsic (GSIC 27.51, +0.60, +2.23%) , Methanex /quotes/comstock/15*!meoh/quotes/nls/meoh (MEOH 26.27, +0.57, +2.22%) , NII Holdings /quotes/comstock/15*!nihd/quotes/nls/nihd (NIHD 40.53, +0.29, +0.72%) , SuccessFactors /quotes/comstock/15*!sfsf/quotes/nls/sfsf (SFSF 20.83, +0.50, +2.46%) , Veeco Instruments /quotes/comstock/15*!veco/quotes/nls/veco (VECO 40.35, +0.46, +1.15%) , Virgin Media /quotes/comstock/15*!vmed/quotes/nls/vmed (VMED 17.44, +0.20, +1.16%) , and Waste Services /quotes/comstock/15*!wsii/quotes/nls/wsii (WSII 9.86, -0.10, -1.00%) , to name just 18.
In summation, we are very bullish. We do not use adjectives lightly, and cannot recall the last time the term "very bullish" was used. Breadth, leadership, and Nasdaq volume are all positive.
In particular, we like the fact that hundreds of stocks are building, and breaking out of, sideways areas of consolidation, known as bases, more than at any time since 1999, and possibly longer. Short-term, the averages have been overbought for eight-straight days, and thus deserving of a pullback.
Kevin Marder is a principal of Marder Investment Advisors Corp., and was a co-founder of MarketWatch. He is a contributor to The Gilmo Report.
- colbear | 12:06 a.m. Today12:06 a.m. March 12, 2010
If the results from AnnTaylor Stores are an indication, things are looking up for some consumers.
53 min ago1:19 p.m. March 12, 2010 | Comments: 12
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