Volume ran lower on the day as pending home sales dropped much more than expected, but prices were able to hold. The session began once again with the market opening higher. Waiting on the pending home sales data traders appeared to chear the lower jobless claims number that had proceeded the open. Upon the release of the pending home sales data traders began to sell stock at a less than a snails pace. Volume continued to run lower even as prices dipped lower. Intraday action wasn’t too exciting in the indexes but a late day surge pushed stocks to the highs of the session near the end of the day. Once again, a call for a pullback was ignored by the market and continued to push forward.
As we continued higher put buyers began to scoop up put positions. Whether a hedge or not our fear indication was running high and traders are quite fearful of a reversal. Much of last year we reversed hard when we were at “overbought” conditions. A healthy dose of fear is exactly what this market continue needs to have. The “wall of worry” is alive and kicking.
The crowd is certainly not bullish, but not terribly bearish. AAII bull and bear survey showed the number of bulls barely inch higher to 36% and bears fall to 26%. With the Russell 2000 at 52 week highs and where we are at with “overbought” conditions this survey is showing it appears we may have the makings of a power move. Not too mention we continue to have plenty of leadership to support the current uptrend.
If you were reading our market commentary during the second week of February you’ll know we have been right on top of this uptrend. We didn’t get our typical follow-through day by IBD standards, but we had plenty of volume and price movement to get long stocks. Not too mention we had a second near follow-through day. Remember, IBDers have been taught that 1%, 2%, 1.5%, 1.7% with volume higher are indications of a new uptrend. It is quite possible we don’t need 1.7% or 2%, but any strong price movement above 1% with volume higher as a follow-through day. In this case, it has been proven very profitable as we have plenty of stocks continuing to move higher and forming bases.
Tomorrow’s job’s number will certainly be scrutinized and at last check the market was looking for a job loss of 65,000 with an unemployment rate at 9.8%. Every economic number has become the “most important” according to the financial press. For whatever reason traders believe if positioned properly they can guess the number and the market’s reaction. They might was well go to Las Vegas and put their money down on Green and let the ball decide their fate. Simply guessing is a fools game and it is not one we play here. While the reaction to the numbers will be shown in the price and volume action, we’ll use the entire picture and not just the jobs number.
Stay disciplined.
As we continued higher put buyers began to scoop up put positions. Whether a hedge or not our fear indication was running high and traders are quite fearful of a reversal. Much of last year we reversed hard when we were at “overbought” conditions. A healthy dose of fear is exactly what this market continue needs to have. The “wall of worry” is alive and kicking.
A typo. Perhaps you meant to say “…….Much of last year we reversed hard when we were at “OVERSOLD” conditions. …..”. Is this correct?.
You are, thank you for catching my error! At least someone is reading.
Much appreciated.