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Market Moves Higher Despite Sentiment


Well, we had some negative movement early today in the broad market, but ended as the market rallied and the buy-the-dips group came in.

Sentiment is WAY bullish. That is just too negative (sentiment is a contra-indicator) yet all of the technical aspects of the market are pushing higher. We could be moving into a situation where we will consolidate over a few weeks in a sideways pattern with current levels being the upper end of the sideways range (much like we did in June before the July break-out. That could easily happen again as there are a lot of investment managers who have under-performed YTD and want to get into the market (they are the primary buy-the-dippers). A sideways correction is always a possibility, particularly if economic numbers start to come in better and show an improving economy.

Look at the On Balance Volume line on the graph above: it is in a strong up-trend.

Look at Volume itself: today it was right on the moving average line (not significantly below as some on TV are saying). Average volume does not discount the strong trend of the OBV line.

The MACD at a bit under 20 is strong, and with the black line above the red line (if you look close) that is also positve.

The ADX line is curling up and as its above 30 it shows the market remains in a strong uptrend.

The Accumulation/Distribution line is in a strong uptrend and is curling up. The Money Flow is strongly positive (although not as strong as a month ago) but it is starting to turn up, too.

The Stochasitics at above 80 is worrisome and indicates we are due for a consolidation. Maybe, it will be a sideways consolidation instead of a major pullback that clears turns the bulls to bears and reduces the danger of a pullback.

That said, we implemented the profit protection plan described in yesterday’s post. We booked profits on those partial positions and set stops as described – some of which hit in this morning’s selloff. I’m OK with that as we have a bit of cash on hand to put back into the market if we get a pullback.

Anyway, its getting late and I’ve had a very long day of meetings and investment activities, so I’m going to stop working and watch the season finale of Royal Pains (yes, summer fluff TV). As the market becomes clearer, I’ll keep you posted on what we see and what we are doing with our clients’ portfolios.