Futures began the week higher leading into a holiday shortened week here in the United States. Volume was predictably weak after Friday’s option expiry elevated levels would have been extremely difficult to beat. A positive sign on the day was the outperformance of the Russell 2000 as we finally seen small caps outperform bigger cap names. Not to be outdone the NASDAQ was not too far behind beating the S&P 500 by more than three times. We still continue to operate in this uptrend, but we do remain extremely overbought conditions. Despite the conditions of this market we must stick with our process and push forward. The limited amount of distribution and action in some leading stocks certainly points to higher prices. Stick with this trend.
We are certainly overbought and we are at any time vulnerable to pockets of selling here and there. The key thing we do not want to see is heavy distribution and leading stocks faltering. This market has not flashed any major distribution days since we found support at the October lows. Since the lows we have not seen any indication this market is going to roll over anytime soon. Do not panic if you do see some selling, but keep an eye out for distribution days piling up. If you see leading stocks breaking key levels and giving off sell signals there should be some concern. Remove the noise and your opinions from your trading and go with the process.
We are lucky to catch a break with the holiday shortened week. Scanning has been somewhat tiring as we have a lot of potential signals to sort through. While so may say this is too much it is our process and it works. We do not deviate from our process as it does work and produces superior gains. Many often drift from their systems and produce poor results. Our system works and works well.
Tomorrow we will get a read on the third quarter GDP. Expectations for the economy to grow at a 3.3% pace and if tomorrow’s number goes as it has in the past it should be higher. Attention will likely move towards whether or not the Federal Reserve will need to raise rates or not. It will not matter to us whether or not the chatter leans one way or another. Only how the market reacts will matter to us. Stay tuned.
A decent start to the week and now we need to continue to see positive action from our market leaders.
