The market is shifting from a period of pessimism, to one of cautious optimism. Traders and investors that were early to the party, have seen a 4.518% rally off the Friday low that preceded the election. NYSE Composite tagged 10,281.48 at this inflection point on 11/04/2016.
Since that low, NYSE Composite continues its upward trek, fueled by pessimistic journalism. Ambivalence and negativity are adding to the contrarian propellant forcing the bears to cover at higher levels.
RSI and HiLo (breadth) in the chart below suggest prices could continue higher, with a potential short term double top (red arrow) as a target. HiLo is crossing upward above the 50 line, which reflects an expanding bullish condition. Read the inset for a more thorough explanation of HiLo.
Additional measures of breadth show reason to be optimistic over the next several days, as NYMO has yet to reach overbought territory. Note the 20ma (blue line) is heading for a zero line cross. By contrast, during the “pessimistic” period prior to the election this moving average was trending lower and held below the zero line. Thus, momentum is shifting.
Barring any unforeseen catalysts, NYMO should continue to reflect positive breadth.
Watch list candidates and long positions for the week reflect a positive outcome to date. ALGN managed +4.13%, ANET is up +2.32%, charged higher by CARB +3.37% and MCHP continued higher by +3.47%. JUNO and GIMO are flat.
Watch list short candidate managed a +14.929% gain since it hit the list 4 weeks ago. Ff you exited on Monday when we suggested covering the remainder of your short positions you reaped the rewards.
Good luck today and remember, no market goes straight up. Expect back and fill along the way. Breadth oscillators suggest we give the bullish bias the benefit of the doubt for the time being. Short positions are counter trend.
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