It was another impressive session on Friday and overall it was another impress week as stocks closed higher Friday on lower volume across the board. Lower volume or not the ability for the market to continue to climb despite the extremely overbought short-term and overbought intermediate term conditions is a powerful sign on the intermediate term. While we should expect a market pullback to eventually take control of the overall tape, it must be acknowledged that this tape is very strong and could continue to easily remain overbought longer than the underinvested bulls can remain on the sidelines.
While I do expect the market to succumb to selling pressure sooner than later with the risk to the downside greatly outweighing the potential upside on the very short term, I have to admit that this move has been stronger and has gone on much longer than I anticipated it would or could. I know I am not the only trader in this boat and due to the length and velocity of this post-Brexit move I have to think that any meaningful pullback will find buyers and support sooner than later. While another V-shape reversal would be par for the course it does appear this time around there are so many stocks hitting new highs that a reversal is less likely this time around.
Another indication that a stronger intermediate term uptrend is possible here is that one of my momentum oscillators is breaking out to a new cycle range high. My TSV indicator on the Nasdaq, SP-500, and DJIA are hitting new 52-week highs which suggest that the market is now in a trending mode. The rest of my oscillators are nearing or at previous highs so there is no new trending confirmation there but the TSV has a historically good track record of leading price when these indicators do make new highs and/or new lows. So I will be expecting any short-term pullback to eventually have a floor and this is why I will continue to operate on the long side despite the overbought market on the short/intermediate term. I will just keep my position sizes reasonable (like I have had to since 2013 due to the non-stop extreme V-shape volatile moves in the overall market) and my stops tight.
We shall see what next week brings. Have a great rest of your weekend and I wish you all the best next week in your trading. Remember if you would like to take a free trial feel free to sign up here. Aloha from Maui where Tropical Storm Darby has yet to arrive.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – SIGNAL DATE
CLR long – +139% – 2/11/16
EBIO long – +97% – 5/26/16
GRAM long – +81% – 4/1/16
SIMO long – +50% – 3/11/16
HBP long – +47% – 3/28/16
GSS long – +44% – 7/1/16
ALRM long – +34% – 3/1/16
EBIX long – +31% – 3/17/16
FCPT long – +30% – 2/29/16
