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Currently, the overall tone of the market is positive as it continues to act very well. Additionally, the number of Industry Groups participating in this uptrend is broadening. On the stock side, chart patterns look substantially better than 4th quarter last year; they are tighter and more uniform. Although I am expecting a short-term pullback around this level, I remain positive on the market environment. I am continuing to gradually increase my exposure as opportunities present themselves, which is effective as most breakouts are working. Since we are extended, discipline is instrumental to holding through any short-term weakness. Bernanke's comments today were realistic and sobering; however, let the stock charts and the index charts guide you, not the news.
Best Returns,
Scott O’Neil President, MarketSmith Incorporated Follow Scott O'Neil at Twitter.com/WScottOneil
Scott O’Neil
President, MarketSmith Incorporated
Follow Scott O'Neil at Twitter.com/WScottOneil
Thank you Scott. I always appreciate your commentary.
At this week’s Meetup, I compared the current market action to the uptrend that occurred in Sept 2010. During that uptrend, we had 9 out of 10 weeks that were up (the one down week, closed down 0.4%). It was followed by a short 3 week pullback, followed by a 12 week rally. The Sept 2010 Rally had taken the market to just above prior resistance of 2551 (May 2008) and 2535 (April 2010). The market appeared to take a break and consolidate some of its gains before moving past the 2600 mark.
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Two indicators that concern me; one is a contrarian indicator, the Bulls vs Bears, which is getting overly optimistic, which is not good. The other indicator that supports my belief of a short-term pullback is that the RS Line for the IBD 85/85 Index (0IBD8) has been trending down, never a good sign in my book. I posted the chart of 0IBD8, with my comments and markups on this blog post. community.marketsmith.com/.../9533.aspx
Not that I am saying that this uptrend will repeat this pattern, but to allow members to see how a pullback would work out and not to panic if a pullback occurs.
As Scott pointed out let the charts guide you, not the news.
Have a profitable year
Robert Paluszak
Organizer of the IBD Meetup in The Villages FL
Follow me at Twitter.com/Paluszak
@ Scott Appreciate the post.
@ ibd-paluszak I think the primary reason IBD 85/85 is lagging is because substantial juice for this rally has come from beaten down sectors/stocks which have had a very bad performance for the past 2 years. Similar times when we had a declining RS for IDB 85/85 was in March 2009 - Sept 2009 where past beaten ones were in a rally mode.