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With the stock market unable to hold gains Monday, investors are wondering if the recent rally has any more room to go. One chart watcher tells Fast Money it's only just begun.
The upswing started last week, triggered by positive news from Bank of America [BAC
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], JPMorgan [JPM
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] and Citigroup [C
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] who all said they had been profitable in January and February.
Then over the weekend the bulls gained more traction after the Group of 20 nations pledged to bolster efforts to help world economies and Ben Bernanke said the U.S. will probably emerge from recession this year and grow in 2010.
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The momentum continued into Monday when another bank said, they too “had a positive start to 2009.” This time the positive news came from Barclay’s [BCS
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].
But then the march higher came to a grinding halt when American Express [AXP
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] said the number of people struggling to make credit card payments grew.
Considering banks are up more than 30% in only a week and the market didn't hold its gains on Monday what's next? We thought it was a good time to check the charts.
For insights we turned to Jeff DeGraaf, ISI Head Of Technical Analysis Research. He’s the #1 analyst in his field as ranked by Institutional Investor magazine.
According to DeGraaf, the market probably climbs for about the next two months. That’s right – he says we’re going higher for the next 60 days.
That’s because the charts suggest we’re in the middle of a great big bear market bounce, according to DeGraaf. “We’re setting up for one of the biggest bear market bounces that we’ve seen over the last 100 years,” he says. "Spring is going to be a decent time for equities."
But DeGraaf also tells us this is not the beginning of the next bull and that means at some point the market should turn lower, again.
What should you watch?
“One of the keys as we climb is to look at the percentage of issues above their own 50-day moving average," he says. "When it gets to about 80% pull the rip chord and start re-asserting the bear trend and get short again.”
What's the trade?
In the near term DeGraaf suggests playing the technology sector which looks best from a technical perspective. And he says "healthcare might suprise for 2009 as a pretty decent place to be."
For more of DeGraaf’s analysis please watch the video above.
- Pure Plays For a Weak US Dollar
- Halftime Report: Retail - The Next Sector to Pop
- BEHIND THE MONEY: 'The Onion' as Trading Indicator
- Web Extra: The Final Trade
- Buying Fear: How to Own Volatility
- Burned by A&F, Alcoa & More
- Chartology – The Stocks/Jobs Disconnect
- The Latest Picks That Paid — Friday, November 6
- Pops & Drops: Burlington Northern, Starbucks, Kraft...
- Time to Trade on Unemployment
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Trader disclosure: On Mar. 16th, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (GE), (GS), (MS), (SDS), (MOS); Macke Is Short (BRK.b); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Terranova Owns (KCE), (JPM), (X), (POT), (WYNN), (XBI), (HESS), (INTC), (BRCM), (DELL), (JOYG), (FXC), (EOG); Terranova Owns (IBM) & (IBM) Calls; Terranova Owns (DIS) & (DIS) Calls; Terranova Owns (COP) Calls; Terranova Owns (AMGN) & (AMGN) Puts; Terranova Owns MACI Oil Futures; Karabell Owns (BHP), (CSCO), (FCX), (FXI), (GOOG), (GLD), (GE), (JPM)
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