Looking Back On April, Here’s What My Scans Show
As April
comes to a close, here’s a breakdown of what I’m seeing in the market:
Positives —
Sentiment —
In a recent column I mentioned that sentiment was the only
real positive for the market. That still holds true. Several measures of
market sentiment have signaled that a rally could occur at any time.
Neutral —
New Highs vs. New Lows
— While downside breadth has remained stronger than upside breadth, it has yet
to really explode. Much of the downside momentum in the market up to this point
has been transitional, with areas that were in uptrends rolling over and
establishing downtrends. Should last week’s lows in the major indices fail to
hold, I would expect downside breadth to expand significantly.
Negatives —
Accumulation/Distribution — Rallies have continued to
occur on light volume while selloffs have been accompanied by heavy volume.Â
This kind of distributive action must reverse for the market to mount a
sustainable rally.
UUWNHI (Unofficial,
Unscientific, Working/Not working Hanna Indicator) —
The volatility has made both breakouts and breakdowns sucseptible to failures,
as the environment has been more whipsaw than trend based. This means careful
selection and patience have been necessary to reap rewards. There have been
decent moves in both directions (examples: NSI, VLCCF long — IKN, F short) but
the most profitable strategies have been those that anticipate reversals in the
indices.
Foreign Markets
— Most foreign markets are a disaster right now. Looking overseas for
leadership is futile at the present time. In many cases the technical damage
done overseas is even worse than the U.S.
My Shrunken Watch List
— My long-side watch list began withering a while ago. The number of stocks
making it through my scans has remained very low, and among those, few are
exhibiting the kind of fundamental and technical strength that would warrant
watch list status. Short list scans and candidates have risen some, but not
dramatically. Due to the technical picture that most areas are exhibiting, I
believe a move in the market down would have a more immediate impact than a move
up. In other words, it would take longer for long-side leadership to develop on
a move up than it would for short-side leadership to develop on a move down.
Summary
— Most of what I’m seeing is still negative. I believe we will
see further downside, but perhaps not immediately. Traders should look to play
both sides of the market. Conservative position sizing is appropriate on all
but the best entries with very favorable risk/reward.  Don’t get wiped out in a
difficult environment. You’re better off waiting until odds are in your favor
than getting overaggressive when they aren’t.
Best of luck with your trading,
Rob
P.S. If your looking for a
simple, historically effective way to capture profits by incorporating spread
strategies near market turning points, check out my
Hanna ETF Money Flow System. If you’d like a copy of the 6-page
introduction to the strategy manual, feel free to email me and I’ll send it
along.
P.P.S. I will be away on
vacation, returning May 16.