Despite a recent high count of distribution days (8 for S&P), IBD says today’s action is enough to resume the uptrend.
The Fed said in its statement that “the case for an increase in the federal funds rate has strengthened,” but added that it decided to wait for “further evidence” of economic progress.
The Nasdaq apparently needed no further evidence. The index pegged a new all-time high. The new high means the market uptrend has resumed, and investors should increase exposure to stocks
I have not heard it put this way before.
The distribution days remain, although the Nasdaq trimmed its count to three. The Aug. 16 distribution day fell off the Nasdaq and the S&P 500 because of time. After five weeks, distribution is no longer relevant to current conditions.
So, anyway, that’s the news from Lake Wobegone
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10/4/16:
Dollar- and rate-sensitive stocks led broad losses Tuesday on concerns about Brexit and interest rates, as the market extended an uneven performance.
Indexes came off session lows in the final hour, but still left the Nasdaq with a loss of 0.2%. The S&P 500 fell 0.5%. Declining stocks led winners by a 13-to-5 ratio on the NYSE and Nasdaq.
Volume increased in the major exchanges, which translated to a new distribution day. It was the eighth day of higher-volume selling in the S&P 500 the past few weeks — a number that indicates institutional investors are substantially lightening their stock holdings.
Not only is the S&P 500 burdened with distribution, but the index keeps trading below the 50-day moving average. That line is starting to curve downward, all of which paints a delicate picture.
At the same time, however, the Nasdaq is holding above its 50-day line and has notched a tolerable four distribution days in the past five weeks. The Russell 2000 has traced a similar chart, as small-caps and the technology and medical sectors have made a push for leadership the past few weeks.
With indexes diverging, it’s difficult to conclude that a market top is at hand. Moreover, leading stocks continue to perform satisfactorily.
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