The stock market remains in a powerful cyclical uptrend in effect
since 3/09. Price momentum has eased measurably as the market
has advanced, but this is a normal dvelopment. My internal market
measure -- cumulative advance / decline plus unweighted prices
has run far stronger than the SP 500, a good sign.
The market exhibits a modest overbought short term and a stronger
one based on 6-13 week reads. An early bull market hallmark does
involve an extended price advance coupled with a substantial and
continuing intermediate term overbought. In a period such as this,
I find it difficult to pick interim tops and corrections when the short
term momentum of the market does not behave audaciously.
25-40 day measures of RSI are around 60% and do suggest the
recent loss of positive momentum may extend ahead. There are not
sufficient disconfirmations from other favored measures to signal
that a significant price correction may lay right ahead.
Because the SP 500 has lagged the broader, unweighted price
measures of the market, it could take another month or two
before the "500" confirms a major positive cyclical reversal.
My reading of the charts suggests that even if a 5-7% price pullback
does lie ahead in upcoming days and weeks, there could well be
another extended but more moderate upleg in price to follow. To
continue this conjecture, I would have to say I am more confident
another upleg lurks out there than I am that we would escape with
a mere 5-7% correction.
The two sentiment measures I follow most closely, the trader
advisories of Market Vane and Consensus Inc., are both a country
mile below levels that would signify "too many bulls".
SP 500 chart is here.
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