Securities Research Services

Thursday, April 17, 2008

Market Breaks Out, Stay Focused On Commodities

The market has now experienced two strong days of accumulation. This follows the breakout day, which occurred on April 1. Following the April 1 breakout, we noted that the market showed a strong propensity toward higher prices.

Keep in mind the fact that the pullback following occurred on lower volume, which served the purpose of filling the April 1 gap, keeping things orderly.

Now that the buyers are stepping back in, this gives an excellent boost to stocks in the strongest sectors, which we have been involved in accumulating over the past few days.

It is our opinion that risk of failure in much of the stocks that ran up yesterday is high and that only a handful of sectors promise reliable gains moving forward; these sectors include metal, agriculture, and to a smaller degree, energy.

We suspect that those who try and bottom fish this market will get burned, but those who recognize the speculation taking place in the commodities will enjoy a decent run.

Again, discipline is important in this market and discipline demands staying focused on the groups that have been working and avoiding everything else.


Note that a time correction vs a price correction is the most bearish of the two possible scenarios. Ultimately we are probably looking at support at SPY $126 giving way for even lower prices this year. There is nothing bullish about the long term outlook of this market.

If a gun were placed to our head and we had to pick a price, it would be our best guess/estimate that the SPY will tag $141.50 before it runs into a severe amount of selling pressure once again.

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