Early morning gains were erased despite Obamacare receiving a favorable ruling from the Supreme Court of the United States (SCOTUS). Healthcare certainly received quite a boost from the ruling with quite a few healthcare names racing higher. Preliminary volume figures are mixed at the moment, but volume was definitely below average today. The past two days have helped cool off any overbought conditions in existence and while we did see a distribution day yesterday we still remain above key moving averages. For now, our uptrend is in place and despite a high number of distribution days this market still can plow higher. The key here is to remain steadfast in your trading approach.
Between Greece and Icahn there is plenty to be worried about. Is this the next bubble? The argument here is the explosion in the Federal Reserve’s balance sheet. Sure, it has exploded. However, how do we know this is a bubble? How about the Private Equity market bubble? We can move to the debt bubble too. Then there is the High Yield piece of the debt bubble we can talk about. In the end, the bubble talk has been going on for quite some time and it has yet to come to fruition. There is always a chance at some point we get a correction. While others try and pinpoint with unobtainable accuracy we will simply follow price, use risk adjusted position sizes, and exits. Everything else is noise.
If we begin to experience more and more of our holdings breaking down and failed triggers we will certainly take notice. It is normal to have sell triggers during a market uptrend. However, this does not automatically mean we are about to head lower in a nasty correction. There needs to be a pile up of distribution in a short period of time and aforementioned conditions within our portfolio. So far, all we see is what you typically see in an uptrend. While these conditions may change for now they remain as such. To be a hero you must know what works. Guessing where the market will go next is just not something you want to do.
What is promising is the support IWM received at today’s lows. It just so happens to coincide with its 10 day moving average. The Russell 2000 is set to rebalance along with the rest of the Russell family of indexes on Friday. Despite the rebalance we have seen the small cap space lead the market higher and as long as it maintains positive price action it should continue to push higher. Meanwhile, the Dow and S&P 500 continue to limp along. It pays to be in the leaders.
What is something that is troubling is the Dow Jones Transportation index. The index just hit a new low for the year. The index already had its death cross back in late May and has found trouble regaining its footing. Certainly something to keep an eye on as we move forward. In addition, we should also keep an eye on HYG and JNK. High Yield typically foreshadows future equity market direction. While we always follow our price signals there are some blemishes in this market. Stay tuned.
Sentiment jumped week over week. AAII bulls jumped back above 30% ending the week at 35% while Bears dropped to 21%. Not a big surprise given the rise in equity markets. However, NAAIM active managers did NOT increase exposure to equities week over week. It is very interesting to see the divergence in the figures here.
Keep grinding and don’t forget to take advantage of our 40% off Platinum Subscription price! Deal lasts through the end of this month so DO NOT HESITATE.
This market is continues to baffle many and gives just enough for talking heads to spew out noise. Price is the only thing that matters. Cut your losses and ride your winners.
