Stockhaven Blog  

Another summit has came and went and one thing is clear to us, sentiment is still extremely negative. The front page of this weekend’s Wall Street Journal dawned the following headline:

“Questions Plague EU Pact – Europe’s leaders agree to repair flaws in currency, but bold steps missing”

Regardless of what steps are “missing,” we feel that the mere fact steps are even being taken is a positive. Only a month or so ago we couldn’t get EU policy makers to agree on where to go to dinner, let alone get any type of deal done.

In the long run the details of this deal are very important and if there are key omissions from the deal then they will certainly impact the market at a later date. But we’re concerned with the here and now and the current technical backdrop is much improved. If the S&P500 can remain above its 50 day sma (currently around 1,220) and eventually get above its 200 day sma (currently at 1,263) we feel we could get a pretty powerful rally.

Why? Because there is still too much cash on the sidelines as evidenced by this statistic:

“Outflows from long-term mutual funds spiked in the week ended last Wednesday just as equities began to rebound from November’s slide, the latest data from the ICI show. Domestic stock funds continued to see net outflows, and they jumped to an estimated $6.67B the latest week, roughly double what has generally been logged the past several months.”
- The Wall Street Journal, December 7, 2011

Investors are still not in this market even as it has risen nearly 17% off the 1,074 low put in on 10/4. Somethings gotta give. Either the markets are going to start downtrending again, providing vindication for all of those who have decided to move money to the sidelines, or the markets will complete a key technical breakout forcing those on the sidelines to participate. So have patience and have a plan for either outcome.

Are you NEW to Stockhaven.com?

If you want our penny stock alerts like RYUN from .22 – $1.90: Sign up for our free newsletter here.

Become a member of our FREE penny stock chat room for intraday Free Penny Stock Alerts and interact with over 100+ active daytraders. Join our stock chat room here.