The internals were excellent with a mere 248 net declines for the important A-D index – this is vastly
superior to the 117-point drop by the DJI. Also, and this is very important, the P-C ratio jumped to an
impressive 207% at noon, 232% at 1:00 p.m., 202% at 3:00 p.m. and 150% at the bell – not a great
close, but still o.k. Market losers were HD, HON, IBM, AXP, WMT and there weren’t any point+ winners.
Conclusion:
A few days ago (5/24) we suggested that the market might engage in a pullback of 3%, which would
carry it back to a theoretical support area of 11000. Predictions like that are not etched in stone, and
they’re meant to give some guidance as to possibilities – it could have just as easily been 2% or 5%.
We’ll see if the latter occurs. The real clue during such bouts of profit-taking is in examining the
“internals” as it goes on. I will say that as of now, they’ve been good. Volume has declined on Ï days,
breadth has shown good signs of relative strength on Ï days and we’ve seen some pretty good P-C
ratios a few times. Remember that there is $2 trillion in money market funds and, according to Indata,
there was 14% cash in pension funds and other institutional investments – that’s very high. Traders can
follow a strong close."" From RJF |
