WARNING - CAUTION - WARNING - CAUTION !!!!!
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Last week I turn intermediate bullish based on significantly improved market internals and the bullish action of the market. However, after further research my GUITAR is hinting of negativity, so I need to add caution to my intermediate bullishness.
I already mentioned that I have CLASS 1 SELL signals pointing to a short-term top on MONDAY, and I mentioned that the pullback should be small(150 DOW points) and a good buying opportunity. Right now I am shifting, and I am not that sure anymore if the forthcoming pullback will be that small
Here are the reasons I have become cautious toward my bullishness:
1) As previously mentioned, the all-time high volume in the
NAZ is hinting of some sort of capitulation to the upside. Simply put, there was massive buying.
2) SECTOR ROTATION
It was brought to my attention through a PM that the rotation were becoming shorter. In the past when we had obvious SECTOR ROTATION the runup in the good sectors lasted about 1 month or more. Now the SECTOR ROTATION is only lasting a few days. A recent example was the HiTECHs which just had some negative rotation where the DOW/BKX was running up as the NAZ was lagging for a few days, untill the end of last week when it exploded to the upside. Another example was the BKX huge runup last week then stopped as the NAZ took off. The sector rotation appears to be now lasting only a few days, not a month.
As I have stated many times, I believe that SECTOR ROTATION is an ANOMOLY/ABNORMALITY and will eventually need to be corrected. Since MARCH the norm within the ANOMOLY of SECTOR ROTATION was for the rotational moves to last about 1 month. Now that the the rotational moves getting shorter, I feel that such action is another ANOMOLY, and could say that we have an ANOMOLY within an ANOMOLY. Again, anomolies need to be corrected.
3) PARABOLIC MOVES and GAPs
Many stocks and indices are now having a series of GAPs and the recent moves were explosive over the last 2-3 days. Some of these also appear to be EXHAUSTION GAPS. It is the common belief that GAPs need to be filled. With so many GAPs, some or many of them will get filled implying that we should see reversals to the downside to at least the beginning of the GAP/GAPS. In light of my CLASS 1 SELL signals I am suspecting that the filling of the gaps could be completed within the next 2 weeks with the pullback starting early next week.
As for the PARABOLIC moves, that by itself is an anomoly, and it is common that PARABOLIC moves are retraced at least half of the move if not all. Take a look at GE. GE normally does not move that fast, so is it a parabolic move or just a spike up to a higher basing level. Other examples are the BKX/RLX/NAZ/theres plenty.
I will not totally discount the BEARISH senerio yet, so although Im more bullish than I was before, I have to add caution to it.
Personally I boxed the market on FRIDAY with a position biased to the down side, where Im about 65% short and 35% long, and still have reserves.
Am I sure of anything - HELL NO!!!!!
seeya |
