Market Direction and Internals
The NYSE has been outperforming the Nasdaq by a wide margin, and thus is in a position to tell us a little about investor sentiment as a retest of the 2005 highs, a multi-year high, plays out this week.
NYA – NYSE Composite Index
While new lows have contracted, new highs in this market have managed to keep pace with the first high of 2005 but have not yet expanded significantly. We’ll want to keep an eye on this, as indexes that hit new highs without the support of an expansion in new 52 week highs in individual equities tend to fail sooner than later.
COMPX – Nasdaq Composite Index
Here we have a dramatically different picture. Price is still working on recovering even the 50% line of the decline of 2005.
However, speaking to the positive aspects of this market and chart, we have see new highs begin to expand, and during intraday trade we’ve noted on a number of days that Nasdaq is has been leading the other broader markets higher, on a relative price action / strength basis. We’ve also seen price break down against a (typically “bearish”) rising wedge pattern – such failures often do lead rallies as sellers get trapped. The key to continued price appreciation is whether real buyers step it, not just short sellers covering.
Key here for Nasdaq is to clear overhead resistance and hold above the (approximate) 2100 level, ideally this week.
Trading Plan
Price is pointing up; we’ve been long either for some time or off this last nicely timed entry which fully capitalized on Friday’s price advance. If price stalls much longer we can expect a more substantial retracement of Friday’s price gains – while I may take some additional profits positions established last week, I want to be holding some long with a break even stop in the event that any decline holds above my entry and then continues higher.
My goal at potential major turns is to make what would ordinarily be a one or two day swing trade into one lasting possibly many days or weeks.
05.02.15 08:56 #