Don’t Fight The Tape

Random Thoughts

The Ps (S&P 500) ended flat but the rest of the market did well.

The Quack (Nasdaq) didn’t set the world on fire with a gain of just less than ¼%. Nevertheless, that’s enough to keep it at its highest level since the 2000 peak. Don’t argue with new highs.

The Rusty (IWM) was the strongest once again. It gained .40%. It still has some resistance to overcome but one or two big up days would fix that, especially since it is now less than 1% from all-time highs.

I like the action in the indices but again, ideally I’d like to see the market blast higher, not look back for a while, and then have an orderly pullback-rinse and repeat.

Once again, the bottom line is that conditions continue to improve. As mentioned recently, dips seem to get a bid. And now, if all indices can bang out new highs with vigor we could be entering a momentum phase.

In general, the sector action continues to improve:

Energies crawled higher. Ideally, I’d like to see some acceleration out of last week’s TKO.

With the Quack at 14 year highs, again, it is no surprise that technology remains strong

The Semis put in a solid day. This action has them continuing to rally out of their recent pullback and closing at new highs.

Although off of its best levels, Internet continues to work its way higher.

Outside of tech, the sleepy ole Utilities are starting to act like “go go” momentum stocks, accelerating to new highs.

Gold and Silver stocks were strong. Again, they both still look poised to resume their recent legs higher out of a Bowtie. This might not turn into the mother-of-all bottoms but it sure looks like a tradable rally. As I preach, get the short-term right and then stick around if the longer-term begins to materialize. Write that down.

Not everything is great in the world though. Aerospace/Defense appears to be breaking down out of a topping pattern (Bowtie like).

Major and Regional Airs look questionable at best.

Retail overall still looks dubious.

So what do we do? First of all, don’t fight the tape. As long as the market remains at or near new highs, continue to focus mostly on the long side. I’m not seeing a tremendous amount of setups just yet. This is normal since the methodology requires a pullback. Again, in the meantime, Gold & Silver socks look like they have the potential to make a new leg higher.

Best of luck with your trading today!

Dave