I don't mean in relation to the future mother of my children, by the way. I stand firm in holding out for Miss Perfect. When it comes to the equity markets right now, though, I think it pays to be a hard-nosed realist, rather than a starry-eyed idealist like some of my correspondents in recent days. "I would love to be a bull like you," writes Andrew Dody, "and if it were not for the 'fiscal cliff' I would be one right now."
I am all for patience and selectivity when it comes to trading. Getting hitched to a trade in haste is well-trodden route to later repenting in the red. However, the perfect set-up probably doesn't exist. So, when the good outweighs the bad, it's time to shut your eyes and go long. And right now, the positives certainly outweigh the negatives, whether we're talking about the DAX, FTSE, or Wall Street.
Tech revives
Despite the sell-off of Monday 3 and Tuesday 4 December, the price-action in equities remains bullish. At its highs of Monday, the Nasdaq 100 had risen 8.2 per cent from its mid-November lows. That’s a bigger gain than it had recorded at the equivalent stage of the July–September advance. Both the tech index and the Dow have recovered to above their 200-day averages.
Dow's positive breadth
Market breadth is another positive, as I see it. The McClellan Summation index measures the pace of change in the number of stocks within an index that are rising or falling. Upturns in this indicator from low readings frequently provide excellent opportunities to buy in to the market. The Dow’s McClellan Summation indicator bottomed around -700 in mid-November and is bouncing strongly towards 0. For me, this provides further evidence of an early-stage recovery in the market.
S&P's cycle upswing
What about timing factors? Talk is rife that the 'Santa Claus' rally that stocks typically enjoy at the end of each year may have begun early - and perhaps too early. There is a nice cyclical case to back this up. The hugely influential 87-day cycle on Wall Street is in an upswing and will remain so until mid-January. It called the last peak and trough in US equities beautifully.
FTSE stalls near its highs
Just in case you think I've been blinded by my present love for the stock market, I'll readily admit she has flaws. The S&P 500 and Nasdaq 100 have both given sell-signals on their swing-charts in recent days. The FTSE 100 has stalled right ahead of its range-highs of the last three months. Volumes have remained pretty unimpressive on up-days, although this is equally true for down-days.
Perhaps the most eligible of the indices that I cover right now is the DAX. The German index has broken to new highs for the uptrend that began in September 2011. This is plainly bullish and new post-2009 highs above 7600 now await. And despite its recent strength, the DAX is not yet overbought. I, for one, would happily take this buxom Fräulein up the aisle.
