Stock Market Powers Ahead Says Market Timer Frank Kollar

March 27, 2009 (FinancialWire) (By Frank Kollar)

The S&P 500 Index (SPX) has now gained a remarkable 23% since March 9. The Nasdaq 100 Index (NDX) has added 22.8% and is now at new 2009 highs.

Typically a 20% gain marks the start of a new bull market. If this is a doomed bear market rally, it is certainly a strong one.

Something to consider is that the second guessing and pessimism over the potential for this rally are bullish contrarian indicators.

Over the past three weeks we have had four trading days of better than 9 to 1, up vs. down volume. These are bullish indicators, especially if there is more than one such day in a short time span. These breadth surges were also unusually strong. 27 to 1 on March 10 and then 19 to 1 on March 12, a 10 to 1 on March 17 and then a powerful 31 to 1 on Tuesday March 24 this week.

We have no record of four such trading days in a row. The 1982 bull market started with just two.

Then, according to Elliott Wave Theory, we appear to have just completed a Wave 5 on March 9. Wave 5’s are usually the bottom of a series of waves to the downside. This forecasts an entirely new sequence of waves to the upside ahead.

Sentiment, using the CBOE Volatility Index (VIX), still shows skepticism ending at 40.36 on Thursday, March 26. Levels over 40 used to forecast a bear market low. Of course we have been at high levels since November 2008, but still, holding over 40 on the VIX while the market gains 23% is a healthy sign of disbelief in this rally.

Bear market rallies have a way of looking good before the axe falls, but this one is looking extra good.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.

Kollar’s research has shown that the financial markets are in tradable trends approximately 80 percent of the time. FibTimer strategies define trends and trade them in both advancing and declining markets. Caring nothing about what newscasters say or what the latest economic indicator predicts, trends are where the profits are, and that is where FibTimer is.

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