MARKET MOOD: YELLOW
The market mood shifted into a yellow condition this week and I’m cautiously optimistic. The reason for the caution stems largely from the whipsaw and grind that the market has just experienced. However, its precisely the emergence from this type of environment that tends to spur new uptrends. Most hate the uptrend and don’t believe it… It’s one of the reasons why I personally prefer to play lightly rather than sit out completely.
Here’s a summary of what I’m seeing presently:
- Major indexes took a few big bullish steps. If you open up the charts in the links below, you’ll notice that the Russell 2000 is finally back above its 10wk line and 50sma. It hasn’t done that in nearly 2 months. You may also notice that the IBD 50 (FFTY) is above a resistance level that its had for several months. This is on top of the other indexes being at or near all time highs.
- The New Highs vs New Lows list rebounded. New Highs on the NASDAQ rebounded and even hit triple digits. Its the first time its done that since June. New lows were also in the low double digits for the first time since June as well. NYSE new highs are beginning to come back and new lows are back in the singe digits.
- Distribution Days are relatively few right now. The S&P 500 and Dow each picked up a distribution day on Thursday but other than that, distribution has been sporadic…which is constructive for the bulls.
- There are 39 stocks total on the trade ideas list. The majority are in the neighborhood which means they need a bit more time. Even though there are 2 trades SHOP and PATH which I have a gut feel of 5 for, there are mostly C level setups this week. The reason is because the indexes are predominantly in uptrends and so the stocks that are consolidating are the laggards for now. I think the market can still move higher and the trade ideas can still work, but this should be factored into how positions are sized.
- 2 out of 3 open trades are positive. I’m SPT (+17%) is a great winner so far. PAYC (+2%) and PKI (-1%) are still near the pivot.
- 5 of my last 10 trades were winners. This is within my historical batting avg about 40%.
As noted above, I have a gut feel of 5 for a couple of ideas here. I haven’t had a gut feel of 5 in a while and that has me excited. That said, with the market in an uptrend and these ideas emerging, I’m cautiously optimistic. The gauntlet scores and the ‘trade grade’ scoring rules are helping to keep my sizing in check.
Checkout the charts of the indexes below.
MONTHLY CHARTS (indexes) Overcall Direction = Up: https://www.tradingview.com/x/L58Sj1rR/
WEEKLY CHARTS (indexes) Overcall Direction = Sideways: https://www.tradingview.com/x/FTPN2mbP/
DAILY CHARTS (indexes) Overcall Direction = Uptrend: https://www.tradingview.com/x/QOen80tm/
(on the lower right is the image of stocks hitting new highs vs new lows on the NASDAQ & NYSE)
MARKET MOOD REVIEW