OT: IBD confirmed uptrend (resumes)

IBD had declared “market under pressure” not long ago, you can see why. There were 9 distrubution days for Naz and 4 for S&P. Over the last week or so some have aged and we now stand at 7 for Naz and only 2 for S&P. (Distirbution days are down days on an index with increased volume, thus indicating institutional selling. )

It was pretty obvious by 3pm that this was going to be the turnaround day, and IBD call it after the close. Very strong index gains on higher volume was enough to pull us out of the ‘under pressure’ condition.

a fistful of key indexes rose 1.3%, including the S&P 500, NYSE composite and the Nasdaq 100, which tracks the 100 largest nonfinancial firms on the all-electronic exchange. All three of these indexes beat the Nasdaq composite’s 1.1% lift. The Dow transports were up 2.5%, also a record high

Market breadth was still bullish, with winning stocks crushing losers by a nearly 3-to-1 margin on the NYSE and 9-to-5 on the Nasdaq. The raw new-high list cracked 1,000 on a combined basis for the Nasdaq and the NYSE,

Both the S&P 500 and the Dow 30 posted all-time highs, increasing their year-to-date rallies to 9.7% and 12.2%, respectively. The Nasdaq is up 7.7% since Jan. 1. With the Russell 2000 also scraping into new high ground, the action justified a switch in IBD’s current outlook to “uptrend resumes.”

The outlook was downgraded to “under pressure” just four sessions earlier as the Nasdaq got saddled with as many as nine distribution days over the past 25 trading sessions, an unusually heavy load. Through Wednesday, however, that total has shrunk to seven, including a dubious distribution on Nov. 28 following the Thanksgiving holiday.

Even among the remaining seven distribution days, only two of those sell-offs exceeded 1% for the Nasdaq (-1% on Nov. 30, -1.4% in Dec. 1).

or market bulls, the strength of the big- and megacap plays in the stock market is just another piece of evidence that the big boys and big girls of the market — namely mutual funds, hedge funds, banks, endowments and corporate investment departments — are continuing to deploy cash into the stock market.

Individual investor, do not resist the trend

Optimism among market pundits continues to rise. The Investors Intelligence survey showed that 58.8% of newsletter editors are bullish, the highest since March 2015. The bears have dwindled to 19.6%. While the market research firm notes that a 60% bulls figure would be “a major call to take defensive measures,” history has shown that the market can run higher for months even though bullishness is unusually high. Certainly, IBD has found that the bulls-bears ratio has proved to be more effective in hinting at major market bottoms than market tops.

Meanwhile, the 0.87 put-call volume ratio on Wednesday pointed to a still-healthy level of pessimism, which is good for the uptrend. The growth in margin debt has also been relatively mild.


At some point we switched to confirmed uptrend, but I didn’t post that sublte change.

Currently we sit at distirbution counts of % for Nax adn 3 for S&P. Not long ago we were at 9 for Naz, but many were fairly low volume sell offs in the holiday season. The down volume was higher than previous day so it counted, but you had to take it with a grain of salt. Since then time has erase some old distribution days.

Last week, the Nasdaq composite index jumped 2.6% but the Russell 2000 closed near its low for the week, mustering a gain of just 0.7%. For the bull camp, it would be good to see the Nasdaq and Russell moving in unison, but that hasn’t been the case lately. It’s a yellow flag at this point; nothing more, nothing less.

One of the easiest ways to gauge market health is simply by looking at your current holdings. Are recent new buys holding comfortably above recent buy points? If so, that’s a good sign. Most financials and some infrastructure stocks are doing that right now.

But what about recent breakouts? Are they working or not? This is where it gets trickier, because it’s been a mixed bag at best in recent weeks. Netflix (NFLX), for example, tried to clear a long cup-with-handle base last week but shares reversed in heavy volume Friday. It’s still holding above a 129.39 buy point but the breakout hasn’t gotten going yet.

The bottom line is that if new buys are having trouble making headway, take that as a cue to slow down the pace of new buys. With distribution days falling off the count recently, the market uptrend must still be respected, but watching the action of new buys is also paramount.

Another yellow flag worth monitoring is the CBOE VIX volatility index. The index’s recent slide points toward a complacent market, which is not what you want to see as stock indexes are trying to break out to the upside.