Month-End Summary: Here’s What I See Now
This is my last
column of the month, so as I do at the end of each month, here is a
breakdown of what I’m seeing:
Positives —
New Highs vs. New Lows
— New highs have begun to expand while new lows have been shrinking. This is
positive for the market. Look for this trend to continue if the market advance
is going to continue.
My expanding watch list
— As I mentioned in Monday’s column, the number of stocks making it through my
scans increased dramatically this past weekend. I have also spotted more
quality stocks setting up in basing patterns than I have in a long time.
Accumulation/Distribution
— Price and volume action in the major indices has been decidedly positive
lately. We have seen accumulation in the form of high volume rallies, while
selling has been light. This is a necessary component of any good rally.
Neutral —
Foreign Markets
— The charts of most foreign markets look similar to the US, in that they have
bounced nicely from low levels. Very few are nearing new-high territory. A
couple of the more interesting charts are those of Singapore and Mexico.
UUWNHI (Unofficial, Unscientific,
Working/Not working Hanna Indicator) —  While, breadth
has been strong, the watch list is expanding, and the indices are seeing
accumulation, I have yet to see much in the way of leadership. Very few stocks
have broken out of basing patterns on good volume and gone on to nice gains.Â
When the market is coming from low levels it can take a while for leadership to
emerge, so this is not unusual or terribly concerning. As will sometimes happen
when the market bounces sharply from a low, many low EPS short candidates have
run up quickly, causing traders to cover their shorts.
Sentiment —
Longer-term readings are neutral to bearish (a good thing), while short-term
readings indicate a little too much froth. A short consolidation or pullback
could easily correct the short-term froth. I don’t believe sentiment is going
to act either as a spark or a drag on the market in the near future.
Negative —
Rising interest rate environment
— There are still many questions about the economy. At what point will rate
hikes begin to be a real drag? Will the Fed be able to engineer a “soft
landing†or may they increase rates too much? How much inflation really is
creeping into the economy? Until some of the answers are flushed out and the
Fed stops raising rates, it may be difficult for the market to put together a
strong, sustained rally.
Best of luck with your trading,
Rob
P.S.
Click here for the Hanna ETF Money Flow System.