Sam Collins

Look for Stocks to Continue to Push Higher

by Sam Collins   09/23/09

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What the Markets Are Saying

Momentum readings on each of the major indices are high and trending higher. I'd be concerned about an overbought situation if we were in the last stages of a bull market. But at the early part of a second stage, high momentum tends to indicate that prices will go even higher. And the Nasdaq did close higher yesterday, breaking into new highs for the year.

The strongest momentum reading this year was posted on March 23 at Dow 7,775. That led to the next high on May 6 at 8,515, and, after a small correction, to the June 11 high of 8,878. After the July pullback when, as you may recall, technicians were screaming that the rally was over and were going to test the market's low, momentum turned high again. On July 24, it registered its second-highest reading of the year, and that led to a sustained rally that took the Dow from 9,093 to 9,580.

So, in a bull market, high momentum, like the high percentage reading above the 200-day moving average (covered yesterday), usually results in higher stock prices. It is telling us that there is still a lot of buying power waiting in the wings for a pullback to use as a buying opportunity. 

Today's Trading Landscape

Earnings to be reported include: AutoZone (AZO), Bed Bath & Beyond (BBBY), Cintas Corp. (CTAS), Comtech Telecommunications Corp. (CMTL), Copart (CPRT), General Mills (GIS), Nike (NKE), Paychex (PAYX) and Red Hat (RHT).

Economic reports due: mortgage applications and EIA Petroleum Status Report.

Late news: mortgage applications were up 12.8% last week. 

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