Market Positives–And Negatives

It is a positive that NEW HIGHS continue to swamp NEW LOWS on a daily basis.
It is a positive that ADVANCE/DECLINE figures continue to be strong on a daily
basis. It is a positive that the RUSSELL 2000 has hit an ALL-TIME HIGH…as
well as the S&P MIDCAP 400. It is a positive that WORLD MARKETS continue to be
in gear. But let’s not stop there.
Sectors in good technical shape are now
swamping those in poor shape…and most importantly…about 7 out of 10 stocks
are now in good technical shape. This type of number makes us believe the
market is in no danger of real trouble any time soon.

Shorter-term, the “market” continues to feel a wee bit tired…but notice
that any pullback has lasted a couple of days, has been controlled and
rotational and has been nominal in price.  But…do not be surprised if it
spends some time rangebound…something akin to the past couple of weeks. Do
not be surprised if a pullback occurs. We say this for several reasons
starting off with how extended the NASDAQ has become after its recent
breakout above 2100. Laws of the market dictate that things do not go
straight up forever. We also believe that sentiment has become a little too
frothy. For starters, the percentage of bullish advisors is back up to a
bullish 56%…which of course, is bearish. We are also noticing bullish
strategists being paraded on TV as being “right” this year even though major
indices are just about flatline. Lastly, we are seeing a few too many under
$5 stocks romping ahead on any little tout. This type of activity does not
happen at bottoms.

But shorter-term is shorter-term. Continue to overweight small and mid cap
areas and when things get too extended, let them pull back into support for
additional buying. As we said earlier, until we see heavy volume down days,
we give the market the benefit.

Gary Kaltbaum