The S&P500, Nasdaq, Russell 2000 and NYSE are trading near or at all-time highs, so the question arises, are you a bull or a bear? What are your measures of performance or lack thereof? Are you trading on opinion alone?
Breadth is more bullish than bearish, so it should be no surprise that the indices are flagging at all-time highs, rather than failing. We still have no sell signal.
The lower panel in the chart above reflects S&P500 price action. The current flag denotes consolidation from the recent move and breakout above 2510.00.
Price action for all of the indices remains above their rising short-term (9/20e) moving averages.
Institutional sentiment is more bullish than bearish, as fund managers buy more stocks on the uptick, compared to the number of stocks they are selling on the downtick, on a cumulative basis. The lower panel reflects this measure.
SPY closed the Tuesday session on the uptick, as block trades and imbalances accumulated below price action during the session. Pre-market activity has SPY trading above this zone of short-term support. The lower level with 253.97 downside blocks is counterbalanced by these recent 254.70 upside blocks, both of which delineate a narrow range as price flags.
The direction the market takes in the short-term will become obvious. We either break above blocks or lose support and trade lower. Breadth should signal the change. So far, the latter is more bullish than bearish.
If price, breadth, and sentiment are more bullish than bearish, the watch list stocks breaking out of sound basing patterns should continue to flourish.
Watch List Performance
Focus new entries on stocks showing the most strength.
Delta Airlines reported earnings this morning. Earlier the stock was trading higher by (+2.28%). We are anticipating higher prices for our JBLU and LUV positions.
Finally, it is imperative that we watch bonds and yields, as traders continue to favor equities. Junk bond prices are flagging at highs. A change in risk appetites would typically show up here first. A dip similar to March or late July would need to surface, for this measure to signal a bearish turn of events. Keep an eye on Junk Bonds (JNK) as we trade near all-time highs.
Have a great day,
Vinny
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