Buyers On Weakness...
by Jack Steiman, SwingTradeOnline.com
Be alerted when Jack posts an article
When something is in play we look for a constant or a theme if you will. It can be on anything we deal with in life. It doesn't just have to be about the market. However, we are really only interested in the market, and there is most definitely a theme in play here for the past ten months. Buy weakness is that theme. Pullback's are mostly quite shallow. Even when they're a bit larger, it doesn't take long for the buyers to come in and bring things right back up to where the selling began, if not higher.
We started with a small gap down this morning due to some overbought oscillators on the short term time frame charts. The selling accelerated and lasted for a good portion of the day. When it seemed the selling would accelerate in to the close, we saw some buyers step in and close the markets mixed. The S&P 500 up three. The Nasdaq up fractionally, and the Dow down almost twelve. It had been down about fifty. This day continues the trend of higher lows and higher highs grinding out over time. This is definitely a blast off scenario. It is a market that's edging its way up. The trend remains as it has been for quite some time now. Buyers on weakness.
See today's charts at SwingTradeOnline: COMP (Nasdaq Composite Daily Chart), INDU (Dow Average Daily), WLSH (Wilshire 5000 Composite Daily), NYA (NYSE Daily Composite Index), DJUSRA (Dow US Apparel Retailers), BKX (Banking Index Daily), UTIL (Dow Utility Average).
If you look at the BKX chart included for your viewing tonight you will see it has broken back through its 50-day exponential moving average. That is huge news for this market. I have said all along that with the financials lagging, it would be awesome for the bulls if they could somehow recapture their lost 50-day exponential moving averages. We saw Goldman Sachs (GS) do it yesterday. We saw the BKX do it today. You really can't argue with what you see, even if you feel it's inappropriate.
Many of you feel it is inappropriate and I can understand your thought process, but you never ever argue with the market action. A colossal waste of your time. I know they can fail again but the BKX chart looks solid and bullish and thus higher prices are likely. Again, never a guarantee. However, it is likely you'll see it push higher as now the bulls will be braver and more likely to buy weakness there instead of turning their heads on these plays and looking elsewhere. This BKX capture of the 50-day exponential moving average was the most important thing that took place for the bulls today.
We do have a red flag that we need to keep our eyes on and that's the action of the PowerShares DB US Dollar Index Bullish (UUP) or the dollar. It's trying to form a bullish inverse head and shoulders pattern that, if broken out, could send commodity stocks reeling lower. The commodity stocks are acting as if that won't take place but the pattern is setting up and we must be vigilant in watching to see if it happens. 23.21 would be a massive breakout for this issue on a closing basis so please keep that in your heads as a warning to reduce equity exposure should it take place. The dollar going up hasn't necessarily meant market death for equities recently, but it would for sure in the commodity world, so be careful.
The market keeps grinding its way on up. You stay with the pattern in place for as long as this grind wants to exist. Who are we to argue! Sentiment isn't great for sure but not at extremes in terms of the spread. Close but not extremes. The bearish percent is at extremes but the spread is not. It often takes 40% or more to get to extremes. It's now at 36%. New numbers out late tomorrow. I will update all of you when those numbers come out. For now we stick with the trend in place. The market looks good for now, especially with the action in the financials today. Hang in there and for now I recommend staying mostly if not totally on the long side of things.
Peace
Jack
Jack Steiman is author of SwingTradeOnline.com (www.swingtradeonline.com). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007. Sign up for a Free 21-Day Trial to SwingTradeOnline.com! (https://www.swingtradeonline.com/reg/AT)
