We viewed today as a positive development in the market. Stocks simply do not move in a straight line up or down and need consolidation areas. The past two days we have been digesting price gains, quite healthy action. Volume is no doubt up from the holiday week, but we see today volume slipped from yesterday’s levels. This suggests selling pressure wasn’t enough to send stocks lower and indicative of consolidation.
This type of action is very healthy for a market to go through. Going too far too fast often leads to nasty reversals forcing early exits from otherwise strong stocks. Moves like these are often shaped like a “V” and will leave many traders with whiplash. At the moment, we continue to see a healthy uptrend taking a much needed breathier.
Another positive development is the number of stocks we continue to see popping up in our scans. If we were about to rollover we’d see a diminished amount of stocks in our scans. Not too mention the quality of stocks would be weak. We continue to view this uptrend as one that can and most likely will move higher. Until we begin to see leaders breaking major support areas, institutional selling, and the major indexes stalling we’ll stay on this uptrend.
The market may appear to be at elevated levels the McClellan Oscillator disagrees. I do like to view the oscillator not as a means of trading but to gauge the market as a whole. It simply does not impact my analysis greatly, but it is interesting to see whether or not we are in overbought or oversold conditions. Remember, market may stay within either extreme for an extended period of time. This is precisely why this oscillator is simply a guide rather than a tool.
A reading above 75 indicats a market is overbought and a reading below -75 indicates an oversold market. As you can see the oscillator for both the NYSE and NASDAQ remains near neutral rather than overbought. Couple this with the market action and the stocks in our scans we certainly feel this uptrend has the legs to continue higher.
Many folks on Wall Street are looking ahead to Friday’s job number. I find the emphasis quite fascinating and the action following to be the same. In October we witnessed a very bad jobs number and as futures were being hit hard the market opened above where futures indicated. Not too mention the market closed off its lows on the day. We are in an uptrend and it will take a few days of distribution and selling to end it not one day and a jobs report. Steer clear of making too much of the report regardless of what it says. Pay attention to the leaders and the overall market ignoring the noise spewing out of business news outlets.
Despite this cold snap in the lower forty-eight states, this market remains in its uptrend.
