New High Upon New High 

The Turnaround Is Here 

New High Upon New High

The Dow Jones Industrial Average hit another new high today at 12,486.30, following up on yesterday's rally.

How long can this last? 

Well, according to RSI levels, the rally is not yet overbought. Currently at RSI 69.36 (Overbought is 75), the Dow could have another few up days before flattening out.

In early November, the Dow rose 1.27% from the 10-day Moving Average, before even hitting overbought territory. From there, it moved another 0.74% before riding flat. 

This current rallying leg is in its infancy. It's only moved 0.42% from the 10-day Moving Average. If we liken this rally to the last, then the Dow still has another 1.59% to move. From current level, that's a flattening out around Dow 12,649, probably by mid next week. 

We'll revisit this thesis then.

Additionally, the Russell 2000 (RUT) is trying to get a leg up on the rallying action as well. 

After a falling pennant formation on the RUT that lasted from December 4 to December 13, the RUT is making its move up on the 10-day Moving Average. A falling pennant formation, like this from early December, is a breakout signal. 

This breakout indication is right on time for the Santa Claus and January Effect rallies.

Moving over to holiday video game console news…

Nintendo's Wii hasn't even been out on the market for very long and they're already instituting a voluntary recall. 

The company has announced that it will replace 3.2 million straps. The original straps have caused some untrained players to lose control of the handheld device, making it crash into television monitors, phones, and computer screens.

(For proof of the carnage caused by this new generation interactive game system, check out www.wiihaveaproblem.com.)

That's all for today.

Have a great weekend, and we'll see you next week! 

Ann

I'll let you in on a secret. In one of our Material Profits issues, I recommended PowerShares Wilderhill Clean Energy ETF (PBW:AMEX), and we've been having trouble with it ever since. It's always difficult buying near the top, as we did with PBW back in mid May. 

We did foresee a slight pullback, but when the whole market got slammed, PBW fell a lot further than we anticipated. Not even higher oil prices, which PBW had been moving in lockstep with, could pull this ETF back above its 200-day Moving Average.

And yet, PBW has continuously rebounded to that level. In the past six months, PBW has tested its 200-day MA no less than ten times. 

Now, we're trading just below it, with higher lows and higher volume. It looks like we're gearing up for a breakout. And that's all PBW needs - enough momentum to get back above (and stay above) its 200-day Moving Average. 

In all, PBW remains one of the best sector plays in alternative energy, and moving forward into 2007, you'll see it garner a lot more attention. Just look at how volume's been increasing since October. Average daily volume was 214,000 on October 2. December 14's volume was 379,400, with peaks of more than a million in between. 

Hang on to PBW, and watch for a pop once it regains the 200-day MA. 

Enjoy the weekend. 

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