RealMoney by TheStreet.com
A Dozen Good Things About This Market
Tuesday October 23, 12:11 pm ET
ByAlan Farley, RealMoney.com Contributor


It's easy to get caught up in the negatives after the drubbing the major averages took last week. So I figured that now would be the perfect time to make a list of the good things happening on this autumn ticker tape. Perhaps it isn't needed, given the recovery so far this week, but I'll give it a shot anyway.

1. It's a Bull Market, Part 1: All major averages are still trading above their 200-day moving averages. To me, this level represents the long-term line in the sand between bull markets and bear markets. Simply stated, buyers come to the market's rescue when the indices trade above it while sellers rule the roost after prices fall below it.

2. Crude Oil Divergence: Many energy stocks have been falling or running in place while crude oil runs up to all-time highs. Their hesitation points to growing skepticism about crude's ability to hold on to current levels and might even be flagging a reversal that translates into lower prices for heating oil and gasoline this winter.

3. Buying the Dip: Monday's recovery confirmed that tech stocks look like great buys here. And despite last week's selloff, no technical damage has been done to the Nasdaq 100 or Nasdaq Composite. These instruments are still in breakout mode after rallying through July resistance. So keep your shopping list handy and use further pullbacks to add to positions.

4. Light at the Tunnel's End: There are only seven more trading days left in October. The flip of the calendar will mark the end of institutional tax-selling season and the start of a highly favorable market period that lasts through next January. So if you're worn out, just a take some time off and come back after Election Day.

5. Sellers' Exhaustion: The market has suffered through at least four trading days this year in which down volume has overwhelmed up volume by a 90-to-10 margin. Friday marked the latest session with these lopsided numbers. The good news is that these events signal an oversold tape that can support the upside for several weeks at a clip.

6. Soap Rally: Defensive stocks are attracting strong buying interest as investors look for safe havens in a dangerous market. Here's a snapshot of Procter & Gamble, just in case you think I'm kidding. This bullish chart looks like a slow-motion version of Apple.


7. It's a Bull Market, Part 2: 244 of the stocks in the Russell 2000 moved higher Friday, even though the index dropped more than 3%, and 18 of these maverick issues rallied more than 10%. So what are you waiting for? Get out there and start hunting for other small-caps that are running against the tide. Here are three powerhouses to get you started: Hansen Medical, Overstock.com and Sigma Designs.

8. Sell High, Buy Low: Small investors now have excellent access to short-side plays and hedges in their cash accounts through Ultra Short ETFs. I'd go ahead and make an aggressive bet on the next apocalypse in a self-directed IRA.


9. Merry Christmas: Everyone is talking about the impending death of the American consumer, but the world's biggest retailer is sending out a different message. Despite months of mediocre sales, Wal-Mart has held long-term support in the lower $40s. This triple bottom eventually could give way to a full recovery.

10. Think Foreign: Don't like the American markets? Trade the foreign markets instead. Canada, Spain, Brazil and most of Asia show raging bull markets that can be tapped through country-based exchange-traded funds, or directly through the growing number of U.S. brokers who let you choose country and currency.

11. The Halo Effect: Record sales of Halo 3, the latest installment of the Xbox sensation, are lifting the entire gaming industry just in time for the holidays. Even Microsoft has been ticking higher as this juggernaut flies off store shelves. The best way to play the phenomenon is to buy industry leader GameStop.

12. It's a Bull Market, Part 3: Commodity stocks ticked lower last week, but this doesn't mark the end of the historic rally in those instruments. Easing Fed policy and booming demand practically ensure that companies like Freeport-McMoRan and Companhia Siderurgica Nacional will find interested buyers well into 2008.