Our Buyer’s Caution bias continues to hold.
Short sellers are miserable. We’re glad our analysis has steered us clear of that common temptation to call a top.
Many new Growth Stocks setting up for potential breakouts…
Little action from the major indexes tends to make everyone a little edgy.
A test of the 20-day averages for the S&P 500 and Naz will put them on par with the Dow’s pullback this week. And it’s still likely to happen.
Of concern for Bulls is the Transportation Index ($TRAN), which experienced heavy selling yesterday. With its 20-day trending below its 50-day average it’s still bearish, and will need to adjust before we feel confident in the market’s ability to trend higher for the longer term (like this year.)
Our pullback appears to be on track with the Dow on track to touch down on its 20-day moving average. We expect the S&P 500 and Naz to follow suit. Though…
As always, we trade what is and not what should be.
These pullbacks allow us to better measure the strength of individual stocks, with the stronger ones selling off less.
We’ll take a closer look at our beloved growth stocks in our weekly analysis.
Continued sideways grinding on the major indexes is not without its perks.
The Transportation Index ($TRAN), or “Tranny”, gave us a high-vol rally yesterday, just shy of its February high.
Many had pointed to the index’s relative weakness in the market as a potential downside leader in a correction. But not this week…
High volume trading with little price action after a strong rally is often Bearish. We’d need to see a few more days of it over the course of a week before we start calling it as correction potential.
Though at this juncture we’re thinking a pullback is in order.
As long as we hold above recent breakout levels we’re staying with a Buyer Beware bias. This is a notch up from our Seller’s Bias we’ve held over the past few weeks.
Once a new high is cracked, there’s little in the way of sellers watiting to unload at previous levels they’ve been burned at.
Let’s not get too cerebral here. The market is poised to hit a new high. Once, or if, we do, we’ll get a new taste of the Bull’s potential.
So often we see a strong rally to a new high as shorts cover and excitement hits the tape. But it’s sustainablity will be a wait and see game.
Volume is still tilted to the Bears, as a predominance of institutional selling lingers.