Bull or Bear?
The following commentary is a response to a friend this morning, are we bullish or bearish?
First some bullish facts:
- Blocks keep coming in en masse below price action; this is immediate support. 283.30
- Price is above the rising 9/20ema.
- Breadth is positive (NYHL NYAD).
- Institutional Sentiment: TICK Cumulative still rising.
- Junk bonds are more bullish than bearish; JNK > 50ma with price above rising 20ma.
Support at 283.30 and 279.60 is massive, so much so that those little blocks of 24 million, read sarcasm in my voice, seem diminutive by comparison. That represents a lot of volume support below. Thanks to @liquidassets in the trading room for the updated block chart.
Here is the key that traders often overlook. Until we see some lower highs and lower lows we cannot call a top, especially on one candle. We still have an uptrend.
TICK cumulative, real-time institutional sentiment, into December, went flat. We now know that was year-end tax-related selling and some rotation.
A global recovery is good for stock markets in most countries.
- Most sectors are at extremes in their recently up cycles.
- XLU, XLP, and GOVT are gaining momentum.
- We started a position in XLU, GOVT, and UUP recently.
XLF, XLU, XLE, and XLP could help with rotation, as tax reform continues to usher in better forward guidance and upgrades. We still haven’t seen or heard much from CEO’s.
Few utterances exclaiming “because of tax reform,” at least not as much as I would have anticipated. I find that amusing.
USD has been in a downtrend since the President mentioned, paraphrasing here, “a strong dollar is a problem”, resulting in a bearish trend in the dollar for the past 13 months. Yesterday, he said, and paraphrasing “the economy is strong and the dollar should or will respond in kind.” That prompted furious buying. We bought UUP.
In summary, until we see lower highs and lower lows we cannot call a top, especially on one candle. We still have an uptrend.
That said, we are scaling out of common and trading options with the profits. We are lowering our risk in the process and sleeping like a baby at night.
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