Is This Rally For Real?


In today’s Fast Money Final Call, Matt Nesto spoke with Carter Worth, Chief Market Technician at Oppenheimer Asset Mangement about the current rally and where the market is headed from here.

Worth points out that the idea is not to figure out where the market is going, but where it’s not going, eliminate a scenario and then play the probabilities accordingly. The thesis here is that we’re in the process of stopping the downward trend and that we may have reached the maximum amount of bearish-ness.

Worth has identified two “straws in the wind” that may indicate this trend will reveal itself in the near future.

First, there is constructive action in Semiconductors. They have not made new lows since September, unlike most equities. Worth points out that this situation also existed in 2002-2003, where Semiconductors did not confirm the lows of the S&P 500.

Second, is the action in the key broker dealers, Goldman Sachs and Morgan Stanley . Worth sees constructive action happening in these companies, pointing out that their relative strength compared to other financials may indicate more to come.

But should we believe in this rally, as the majority remains skeptical of this recent upswing?

S&P 500

Although there are many ways of measuring these trends, Worth points out that around the country participation in long holding accounts is very low, and many leverage and margin accounts are not positioned for what could be a big upswing. He points out that we’ve experienced three 20% rallies since October, this may indicate that there still may be some upward movement left.

But is this a bottom? It’s hard to tell. When talking about the future, it’s about trying to figure out whether the market is starting to look different than it had a week, a month, or six months ago, says Worth. And as for his final take on the state of the market: he says that things are starting to look more constructive in the future.

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