Archive for October, 2010|Monthly archive page
Modest Distribution on the S&P 500 and Dow is playing into our Buyer’s Caution bias.
We’re taking a recent boost in volume coupled with mostly sideways action as a sign that the rally is finding it harder to continue.
This type of grinding often sets the stage for a pullback, where we’ll gauge its potential of being subtle vs. a more significant correction.
We’re very eager to buy some of the hotter Growth Stocks out there at more reasonable prices. The market has been extended for some time now, testing the patience of wanting buyers like ourselves.
An uptick in volume over the last two weeks coupled with stagnant price action tells us this rally has cooled.
We’re sticking with a Buyer’s Caution bias, though will turn it to Sell if we see some Distribution Days notched in.
Distribution, where volume exceeds the previous day and accompanies a price drop, gives us indication that institutions may be unloading. And that’s something we don’t want to be on the other side of given the institutions dominance in moving the market.
The major indexes all experienced heavy selling Tuesday, putting the 50-day moving averages in play as support.
Bears have been waiting a long time for a significant correction. The fact that the day marked Distribution, where volume outpaced yesterday’s, suggests institutions are taking cover.
We’re going with a Yellow Flag Buyer’s Caution bias in light of this selling. We want to pay close attention now to how recent leadership holds up to better guage the prospects of this being a mild pullback or something more significant.
Market players everywhere are waiting for a pullback or correction.
Yes, the market has its way of screwing over the most amount of people as possible. Given the high short interest out there we can’t be surprised to see Bears tested as the major indexes continue to ring new highs.
We’re in the camp that believes recent high volume with lack of significant follow through, or grinding, is enough warning to lay low.
Like a tiger in the jungle, we only want to pounce when we know we’ll get our prey. That’s why we’ll wait as long as it takes to get a broad market pullback, ideally setting us up for long entries in the plethora of recent Growth Stock breakouts.