Despite posting gains the S&P 500 and NASDAQ volume ended lower on the day. Despite the positive price action volume didn’t jump along with the move. While this isn’t a major red flag, it is something to watch for over the next few trading days. Commodities reversed on the day lead by natural gas and crude oil. Crude oil broke below the century mark a key psychological area and will be interesting to watch to see if the reversal morphs into a downtrend. Another good day in the market, we continue to see positive signs for this uptrend to continue higher.
At some point the market will pull back and consolidate its gains. One thing to keep in mind is when the market does consolidate its gains, it is how it does so that matters. A few things to look out for are the obvious distribution and stalling days. These are signs the current rally may be coming under some selling pressure and we are at risk of further downside. It is okay to have a few distribution days here and there, but when strung together it is a red flag for the market. Cutting laggards in your portfolio is a MUST! Be on the lookout for possible signs of this market coming under pressure and act accordingly.
Bullishness has gotten to some frothy levels over at the AAII survey. Bulls were more than 49% of the survey while the bears were a measly 17%! Quite the gap between bullish and bearish outlook from AAII survey respondents and it is the second week in a row the Bulls are a shade below the 50% mark. The II survey has bulls more than 50% at 51.1%, but off the highs we say earlier in the year. Bears are scarce at 21%, but well above the 15% low set earlier this year. Market participants are quite bullish for 2012, it wouldn’t come as a surprise the market over the next few weeks tries to shake out the weak bulls.
Getting off the sentiment kick and onto overbought/oversold indicators we do see the number of stocks above their respective 20 day and 50 day moving averages above 75%! Even the number of stocks above their respective 100 day moving average is above 70%. Price action will always be the “tell” on where to get out of the market, but these numbers do suggest at least a pause in the market soon. Remember, it is all about how the market reacts and having a plan to execute!
Have a great long weekend!
