November End-Of-Month Overview
With
November coming to a close, here’s my overview of the market…
Positive —
Foreign Markets
— The U.S. rally continues to be confirmed by strong markets overseas. Some of
the strongest foreign markets are in Latin America, Italy, Australia, and South
Africa. This continued global strength is a positive for the U.S.
New Highs vs. new lows
— New highs have been swamping new lows. Breadth is very strong to the upside,
and there is very little selling.
My growing watch list
— The number of stocks making it through my scans is higher than at any time in
the last 4 years. There are many, many stocks that have broken out and there
has continued to be a steady stream of new stocks setting up. Long-side
opportunities are abundant and should remain strong if the market advance
continues.
UUWNHI (Unofficial,
Unscientific, Working/Not working Hanna Indicator) —
What’s working better than anything lately? Long-side breakouts. Not only have
they been abundant but there has been strong follow-through. Because of the
consistent strength of the market, pullback opportunities have been somewhat
scarce, but really any excuse to go long has been working. Most short-selling
strategies have been punished lately. Until the long side starts faltering,
long strategies are definitely looking like the place to focus.
Neutral —
Accumulation/distribution — Neither institutional
accumulation nor distribution have been strongly evident in the last three weeks
or so. Volume patterns have been inconsistent. Until this changes,
accumulation/distribution will continue to be a non-factor.
Sentiment
— While most investors are more bullish than I would like to see, I don’t
believe sentiment is so extreme that it is threatening this rally. The sideways
action in the indices over the last two and a half weeks has helped to work off
overbought conditions. Short-term sentiment indicators like the VIX are now
trading near the middle of their 10-day ranges. (For those interested in seeing
graphical depictions of numerous sentiment indicators, check out
www.market-harmonics.com and click on the “Free Daily Research Pages†link.Â
From there you can find graphs of several different sentiment studies.)
Negative —
Nothing significant.
After rallying strongly off of
the late October lows, the market has refused to give back anything, but has
begun consolidating. Watch the 1160-1167 area in the S&P 500 for support. A
breach of this level could lead to more severe selling. Based on all of the
positives I am seeing in the market right now, though, I believe this
consolidation will most likely be resolved with another leg higher. I would
continue to focus on the long side as long as the technical picture remains
strong.Â
Best of luck with your trading,
Rob
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