Be Ready–But Don’t Try To Jump The Gun
Tonight is my monthly market overview.Â
Before you read it I should warn you, if you don’t normally like my column,
you’ll probably hate it tonight. I really don’t have anything nice to say.Â
Here’s what I’m seeing in the market:
Positives (my lame attempt at saying something
nice):
Hmm. That’s
tough. The economy? Corporate earnings? It seems like I keep seeing good news
on both fronts, but it is not being received well. Until the market decides that
what seems like good news actually is good news, then it looks like the
only positives I could come up with are really negatives. Oh well.
Neutral
New Highs vs. New Lows: While new high breadth has
shrunk noticeably, the number of new lows has yet to assert itself in a
meaningful way. A few more days like the last two and this may change. Traders
should continue to monitor
Boucher’s Bottom RS/EPS New Lows list to see if downside breadth is picking
up. This could indicate that an intermediate-term downtrend may be emerging and
that short-side opportunities will become more prominent.
Sentiment: Most sentiment indicators have not been
overly bullish or bearish as of late. This is typical of a range-bound market. I
don’t see an edge either way here.
^next^
Negatives
Accumulation/distribution: The last two days have
shown significant distribution. Major institutions are not willing to step up
and push prices higher. There was some accumulation last week but that seems
like a distant memory right now. Until some sustained and steady accumulation
begins to take place, any hope of a decent uptrend will not be realized.
Foreign Markets: Several of the recent leading
markets are beginning to roll over. Examples would include Japan, Turkey, India
and Malaysia. I do not see this as a rotation like we had earlier in the
year. Current laggards like Canada, China, and Brazil are also getting hit. The
pullbacks in the S&P 500 and Dow look mild compared to what is starting to take
place around the world. This does not bode well for the US market.
My Fast-Shrinking Watch List: There are very few
good-looking bases that are setting up right now. Many of those that had set up
recently have fallen apart. New leaders must emerge if the market is to begin
and sustain a new leg higher. The anemic amount of potential leadership is a big
concern.
UUWNHI
(Unofficial, Unscientific, Working/Not working Hanna Indicator): No surprises
here. Breakouts have been failing en masse. Pullbacks are turning into
roll-overs. Long strategies have been treacherous. I have also not seen very
much low-risk opportunity on the short side. The market so far has chopped,
rather than making any sustained move to the downside. Breakdowns haven’t yet
taken hold. Therefore, the best plays on the short side lately seem to be
pattern failure and reversal strategies. All this means that trend trading has
been difficult and I am not seeing any underlying strength beneath the surface.
Summary
In summary, like
they used to say on Hill St. Blues (maybe they still do, but since I don’t think
anyone watches it anymore, it’s kinda like the whole tree-falling-in-the-woods
scenario), “Let’s be careful out there.â€Â The market remains violently sideways
and you may be better off trying to catch leprechauns
than trends. A real move will emerge eventually, and it always pays to be ready
when it does. If I had to guess which way the next move will be, my guess
wouldn’t be up. So be ready, but don’t push it, and don’t try to jump the gun.
Best of luck with
your trading,
Rob Hanna
Â