Transcendental Market Truths:
The Market:
The market seemed to hit a support zone on Thursday and that probably reflects the fact that the market is coming into illegal Window Dressing next week, a period of time when professional money managers ensure their job security by bidding marginal amounts of stock they already hold to higher prices in order to make their portfolios look better at quarter-end snapshot time. Thus, the decline I've seen this week was probably more of a portfolio-trimming operation than a new and bigger correction and should be followed by a run-up to retest the recent highs before the end of the month.
MidCaps:
Certainly, the money flow figures and lack of volume on the downside sends that message. The MidCaps remain relatively strong as they hit my intended target and have slid, more than fell, off it.
As long as the money isn't flowing out of the MidCaps, it's pretty likely that the market as a whole is not in bad shape just yet.
Bond Market:
One of the sources of funds which had been sending equities soaring earlier in the month was the bond market, where rates were soaring. However, rates had risen back to the area they hit in late October when equities had peaked and gone lower.
The pullback in rates is the best explanation for the pullback in equity prices. However, the difference between now and late October is that rates are punching through their upper trading bands. When that happens, it's normal for the market to pull back to within the bands, but subsequently mount a further attack on the upper band once again. This argues that as soon as the bond market has recovered a bit from the selling, a new wave of selling will hit and some of that new cash will find its way back into equities. Word of warning to premature bears: the trend is still up in equities and don't get caught fading stocks when the tide turns. With end of quarter window dressing, however illegal it might be, just around the corner, this is a timely warning.
For now, I'm flat, waiting for a short term buy signal.
Apple:
Apple continues to dance around the 600 price. Is it finished? It's too early to know for sure and why speculate? Yes, if it exceeds the 600 area by much, it's headed for 752, next resistance. But, if it falters, it will likely pull the entire NASDAQ market down with it and that will be a great leading indicator telling me that the whole stock market is heading lower.
VIX:
With the VIX Index so low, it's easy to get bushwhacked in the market. Trends are fragile with VIX this low. Once I start to see VIX in a rising trend, the trends in the stock market itself will get stronger and more profitable. |
