That’s a day of Distribution notched in for Thursday.
Price-action on the major indexes hasn’t moved a whole lot for the past few weeks.
But we’re taking recent Accumulation and Follow Through as signs that institutions have been on the buy.
We also like the fact that the market seems to be weathering negative news.
And on the topic of news, can it get any worse? What would be considered a nuclear blast to markets from a historical perspective has become a near everyday event.
No doubt that if the market truly is the leading indicator of economic activity that we believe it is, holding strong in this kind of sentiment is a key first step.
But as always, let the market dictate your trades.
We’ve yet to see the strong Leadership that we do when markets rebound.
Strong buying on the heels of a target rate cut bodes well for Bulls.
We have further evidence of accumulation from institutions as heavy sell-volume is clearly absent the last two weeks.
Recent institutional buying is especially attractive given all the negative news out there.
If these headlines aren’t inspiring sellers anymore, what will?
But let the market take its course. One thing we can always count on are counter trend rallies that suck in all kinds of money only to chew them up.
The 50-day moving average for the major indexes is the critical line to watch now.
As the S&P 500 shies away from its 50-day moving average we’re keeping an eye on sell-volume to see if it dries up.
Thursday’s market drop was too close to call to tell us if the sellers are stronger than buyers. We need to wait it out for more evidence.
We have a sense that the market has a good shot of rallying in the end of the year given a predominance of high buy-volume days over the last couple of weeks.
These high buy-volume days show institutional support for recent levels.
But we won’t change our bias flag until Leadership from stocks trending above major moving averages takes place.
Obviously, that 50-day MA is a barrier for the major market indexes.
Two days of increasing buy volume suggest follow through of institutional support for the recent market low.
While Wednesday’s 2.5% gain for the S&P 500 is a traditional Follow Through Day, excessive volatility in the market calls for caution.
We’d prefer at least a 4% move to adjust for increased volatilitiy in the market these days. The more the better.
But before any kind of tradeable low we want to see some real leadership from stocks trending above major moving averages, such as the 20-day average.
That nasty 9% free fall on the S&P 500 Monday is just another reminder for us to stay cautious of this market.
Breakout Growth Stock Buyers like ourselves have kept that strategy parked for the entire duration of the market’s free fall.
We see no reason to mess with what it’s handing out.
But we’ll be ready to play whenever that changes.