Are the Indices Showing Signs of Distribution or Consolidation of Recent Gains?
The Indices have cooled off this week, after trending bullish for seventeen (17) trading days. Since the December 26 low SPY gained over 14%, so it would be normal to see a bit of distribution. That said, SPY could take a few days off and consolidate those gains in time rather than price (pullback to a lower price point). So which is it? Distribution or consolidation?
SPY Takes a Break
SPY showed some strength in the second half of the Wednesday trading day, rising back to the upper trend line in this 60-minute chart. In addition, RSI is doing its best to stay above 50, a welcome trend for the bulls.
SPY also showed a reluctance to pull back to the 23.6% Fibonacci, where anything less than 38.2% is viewed as a strong trend. It also gives bulls another sign that the trend might continue.
Bulls need to see a break-out of the 2-day descending channel illustrated, coupled with TICK cumulative crossing over and rising again. A new trend in the latter would be a confirmation signal.
Watchlist Stocks – Relative Strength
Many of the stocks on the watchlist are showing relative strength this week, closing near the highs yesterday.
Earnings results in the airline and semiconductor groups are helping this morning, with XLNX (9.46%) trading higher on “record revenues, and LRCX following (+6.37%) in early trading this morning.
Futures just pulled back as we send this out. VIX is trading 19.98.
NOTE: I WILL BE TEMPORARILY AWAY AT 10:00 AM THIS MORNING TO SPEAK WITH MY CONTRACTOR. SHOULD BE FINISHED WITH HIM BY 10:30 AM.
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