Tuesday, January 22, 2013

Another Bullish Session, But My Gut is Making Me Cautious

We saw another positive session today on Wall Street, which makes four out of five sessions for the S&P 500 and eight out of nine sessions for the Dow.  There were some nice movers on an individual basis and my overall market score remains positive.  I do see a few things that worry me short-term however so I am cautiously on alert.

A breadth ratio I track on a daily basis looks at the number of stocks making 4% moves higher and 4% moves lower on heavier volume.  We are now at fifteen straight days of positive breadth for this market.   That is rare.   I went back and found the stretch ending April 8, 2011 as the last stretch with a longer streak of positive breadth days (sixteen).  A decent little pullback soon followed that stretch back in 2011. 

I also see a few other indicators/measurements that I use at levels that typically indicate a pullback is around the corner.  The T2108 from Worden measures the % of stocks above their 40 day moving averages.  When you get above 80, it's only a matter of time before stocks pullback.  We've been above that 80 level for a good period of time, so it's something to watch. 

T2108

I still see some decent long setups and did start a position in WLT today, but I am going to be a little more cautious here with long positions due to some of the things I am seeing.  I am not saying we're going to start a big correction or anything, but I think it may be a little riskier to jump into new longs over the next few days, and I've been whipsawed out of enough positions already this year that I have no desire to have it happen again. 

AVG
HALO
NSM
TASR
 WLT
 Z
 Charts from TC2000, Courtesy of Worden Brothers, Inc.

I also see some names on the short side that are getting a little climactic in the short-term (names like KKD and RIMM) and if either of those names would see a gap up tomorrow, I will add them to my watchlist, but on the short side only. 

Good luck Wednesday.  If you use TC2000, make sure to follow me as I try to share charts each night in TC2000 due to the ease of their comment feature.  My user name is ChartSwingTrader.  If you want to see some of the charts on my watchlist on a nightly basis, please check out this feature.   If you don't use TC2000, you don't know what you're missing and you can always try it out for free for 14 days to see if you like it.  

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