MARKET GAUGE- Confirmed Uptrend
OVERVIEW- Momentum continued off of last Fridays confirmed follow thru this week led by the Small Cap Russell 2000 which added nearly 4.75%. However, the possible areas of resistance on all the indices that we discussed last week have quickly come into play. As usual, the market landscape is painted in varying shades of gray. Last weeks follow thru day, which was our signal to start looking to some market leaders for some possible long exposure, is now met with several technical challenges. Furthermore, immediately upon last weeks follow thru, few leading stocks were breaking out of well formed bases indicating that there is still some work to be done before any new uptrend can sprout serious legs. As the week wore on, a few more opportunities were appearing leaving us with a slightly more positive tone heading into next week, however, some caution is still warranted. Despite the newly confirmed uptrend signal, we must at least consider that this currently rally may be a sharp retracement in a bear market, so any new long exposure taken based on our signal should be taken slowly and with lowered than normal risk. If we are indeed in the early stages of a new lasting bull leg, many more opportunities will present themselves as we move forward. As we point out in the chart reviews below, the indices are all approaching some obvious areas of resistance, unfortunately what seems obvious in the markets can often be dangerous. I believe it was Linda Bradford-Raschke that stated “markets will often do the most obvious thing in the most unobvious way.” In other words, markets will often frustrate the majority of traders and inflict as much pain as possible before they move in their intended direction. So what do we do? We continue our process of monitoring the indices daily looking for clues as to whether institutional traders are accumulating or distributing stock, but in doing so we can not get so fixated on daily index action that we are not paying attention to what individual leading stocks are telling us as they, along with the stocks in our portfolio, are always the ultimate barometer for our trading. Now, let’s take a run thru the charts where we will see that there have been no distribution days tallied since our confirmed uptrend began on 1/4, which is a positive as we head into trading next week.
That’s all for today. We will be back tomorrow with our complete Weekend Trading Review for our premium members. Sign up for a free trial today at http://www.ttptrading.com See you there!