Wednesday Market Momentum Breadth Volume
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I'm reading a lot of bearish comments lately. I agree the market is correcting despite the rebound over the last couple days. But the new lows are behaving well. So far, I think 10% cash is the appropriate cushion against the potential downside.
Bond rates broke out today. Sure are lot's of cross currents in the market at the moment. I'm a bear on bonds and today helped to support that view.
I'm watching the financials as an indicator for the broader market. It looks like an inverted head and shoulders could be developing which would support the market. If so, I would expect the index to find support soon at around $24. If we get lower lows, we'll probably have to cut back on long positions.
The bullish percent of the financials dipped under the 50% level confirming the downtrend. Now we need to see that this indicator can make a higher low, and it would be nice if it could find support around 40%... or at least hold above 30%. If this indicator dips to the old lows under 20% then I would find it hard to believe that the broader market will have much upside. Part of the bull market thesis is a recovery developing in financials, and this indicator will help measure whether the recovery is for real.
Advance /declines are not my favorite indicator, but when you step back and look at the long term view its worthwhile. The AD has followed the brutal selloff in Q108 lower, but trailing prices lower. In the late 90's, the AD led prices lower. Seem like it is an indication of underlying strength remaining in stocks.
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