Thursday November 29, 2012
by Richard Rhodes, editor The Rhodes Report
We have made various changes to our model portfolio as the market's technical picture has now changed from moderately bearish to bullish.
While we are quite cynical on the whole European Kabuki Theater, the fact of the matter is that it takes concerns over Greece off the markets stage for the time being. Going forward, the markets shall focus upon US Christmas spending and the upcoming Fed meeting on December 11/12.
The focus shall be upon the fact the Fed is running out of short-term securities to buy longer-term securities, and therefore is likely to start expanding its balance sheet in the form of buying US treasury securities outright.
This is force-feeding reserves into the banking system and should be initially bullish for US and world shares; and at this point...it is supported technically.
Meanwhile, the various indices formed bullish key reversals higher on November 16th, and prices have not looked back since then as they have corrected very little. This begs the question as to whether a correction is warranted or not; and of course it is.
However, we know that the markets tend to do what the masses are not doing, and for the moment; trader and investor sentiment is rather bearish at present, with the put-call ratio are at levels that tend to support rallies.
Moreover, our models are in a bullish configuration, with our intermediate-term model showing signs of bottoming. Collectively, this supports higher stock prices...regardless of our cynicism on Europe and the US economy.
At some point a larger correction will develop -- but for the moment, that period is pushed out sometime into the future.
Hence, we added the following new positions: Occidential Petroleum (OXY), Apache (APA), Microsoft (MSFT) and Freeport McMoran (FCX).
The technicals behind each of these trades are such that our risk can be managed by the recent lows, while the upside may well be quite sharp indeed. However, we are not inclined to add any additional positions at present, as the current one’s need to become insulated from ran-dom noise before doing so.
Learn more about this financial newsletter at Richard Rhodes, editor The Rhodes Report.