Thursday, February 2, 2012

Some Thoughts and Charts For Friday - Getting a Little Frothy

Another pretty good day today on Wall Street but as I stated on Twitter several times today, this market is reaching extremes that make me a little cautious here.  I am not bearish or anything but we are at levels breadth-wise where the market can throw a very quick shakeout at us.  There are 26 stocks up 50% in the last month (anything over 20 can indicate frothiness).  The number of stocks down 25% or more in the last 65 days is under 200 (which can indicate frothiness as well).  This doesn't mean we can't go higher, but it is something that can act as a warning sign.  The Nasdaq is also quickly approaching the 2011 highs which likely will act as some resistance (at least initially).  I still have long positions but I did get off of margin today, cut a few stocks that weren't moving, and took gains in one other.   I also tried a stupid hedge with TVIX that ended up be stopped for a loss. 

I am putting these charts out tonight with one caveat - be aware that this market could really use a little rest here.   Buying aggressively at this point could get you in trouble.   Please make sure you use stops and check earnings dates as well.   I will watch these names but don't know how aggressive I will be with them.   If we get another strong up session tomorrow, I will likely take some profits in my remaining names into that move.

All Charts from TC2000, Courtesy of Worden Brothers, Inc.


Anonymous said...

hi mac

i just dun feel good the way it forms mini-double peak after overbought.

i looked at 3 years daily (yes, not weekly), all of those mini-double peak are with 1st peak very overbought then the 2nd peak divergence, then a correction follows.

some charts do look good but my discipline cant allow me to enter long position when most indicators are already up over 2 to 4 weeks.


Anonymous said...

hi mac

lol, that doesnt look like a BULL-I, more alike we are into medium phase of BULL-III.

last thursday dow dayhigh was 12841.95, we then need 1 or 2 consolidation days before marching higher, and then higher...


mini me