OT: Uptrend Resumes

After the DOW futures were down about 800 (4%) at midnight, the market began to realize there would not be a contested decision, with ultimate uncertainty. By market open they were in the 200 down range. When the candidates started giving their grown up speeches, the market realized there would not be civil war and it roared higher on huge volume. This took us from a market that was “under pressure” and seeing distribution to an IBD call of “Uptrend Resumes” where growth stocks are likely to be under accumulation by the big boys and therefore more likely to rise. (If we were in correction mode, the attempted uptrend would have started on the first up day - Monday, post Comey, and this would have been a confirmation day to put us into “Confirmed Uptrend”. Without the correction, our uptrend is not considered as strong by IBD)

Yuge volume on the indexes:

Leading stocks are acting pretty well, and the Nasdaq, S&P 500, and even the Dow Jones industrials all rebounded back above their 50-day moving averages. These facts justify a change in the trend and give astute investors an opportunity to buy with higher probability of making money in growth stocks.

Keep in mind that the Dow Jones industrials, which rallied 1.4% and nearly mirrored the action seen during a rare Day 3 follow-through taking place on June 30 by both the Nasdaq and S&P 500, is now back at a level where the market began to succumb to sustained selling pressure. And the distribution-day count remains elevated.

Meaning that a few bad distribution days now could put us under pressure, whereas the same after a clean follow thru day would not be as meaningful. (I know, wonky and useless for this board)

The market moved into a confirmed uptrend after a rare Day 3 follow-through rally on June 30.

The 10-year yield spiked more than 20 basis points to 2.07%, crossing the 2% barrier for the first time since January. Tradeweb noted the one-day gain in yield as the highest ever since the 10-year note began trading on the alternative exchange in November 2007.

So rates jumped and the market did not care. So if the fed raises in December, they are just catching up, so it may well have no effect on the market.

We still have 7 distribution days for the NAZ and 6 for the S&P.




The action in the Nasdaq was bad enough to slap a distribution day on the composite. Although the uptrend resumed Wednesday, the indexes are carrying a heavy load of distribution (#8)

This means the market is vulnerable to a sudden switch. Megacap internet tech stocks were the force behind the Nasdaq’s dent Thursday. Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), Amazon.com (AMZN) and Facebook (FB) each dropped sharply in fast trade. Those stocks alone account for 31% of the weighting in the Nasdaq, including the Alphabet Class C shares.

Together, the exit from the internet and tech stocks, along with the shift to banks and other plays, point to sector rotation

Lots of belief Dodd-Frank will get eviscerated.

Friday was a quiet day of low volume. Third day is often the pause in the party .

Meanwhile, the S&P 500 lost a distribution day, as the Oct. 7 day dropped off because of time. After five weeks, a distribution day is no longer relevant to current conditions.
Dist = 8 for Naz and 5 for S&P.

The article goes on to state the obvious, stocks perceived to be helped by Trump (infrastructure, banks, etc) are up and stocks tied to a Hillary win (Healthcare, solar) are down.

Regardless of what an investor thinks of President-elect Trump, the money chase carries the glow of change. Clinton essentially promised an extension of Obama economics. Trump is likely to go in a different direction, fostering a new group of winners.

The Street loves new leadership because it holds the chance for a longer run than trying to keep an old and tired sector chugging along.

For the week, the S&P 600 advanced 10.6%; the Dow and the IBD 50, both 5.4%; and the S&P 500 and the Nasdaq, 3.8% each

I think the Russell was up 10% too. this benefits many of the stocks discovered by this board. Even BOFI got a huge boost.



The Nasdaq itself, however, rose back above the 50-day moving average. That’s where it should be if the composite has any aspiration to extend its uptrend. That’s no sure thing, but a victory for those watching technical signs.

The Oct. 11 distribution day is now too dated, so it’s been deducted from the distribution-day count (now at 4). Still, the eight distribution days on the Nasdaq remain a drag…

Eventually, it may not matter much if the tech giants end up foundering more. There’s a sector rotation unfolding, which is giving rise to a new market leadership. Construction, financial and some health care segments of the market are drawing the most interest. In the case of banks and medicals, investors expect government regulations to ease for those industries after Republicans secured the White House and control of Congress.

As the market has picked itself up, no group of stocks has shined more than small caps. The Russell 2000, up 0.3% Tuesday, is at record highs and up an astonishing 9% since the election.

Where exactly are small caps getting their strength? Of more than 200 stocks in the Russell index up at least 20% since the election, about 80 are biotechs. That’s a huge chunk of the small-cap rally. About a dozen regional banks are in the same list, in addition to a number of savings and loans and other financials.


11/18 (Friday)

Distribution days are dropping off, but Naz backed off highs.
Dist days: Naz=7 S&P=3

The Nasdaq pegged a new, all-time high in

Volume was sharply lower on the Nasdaq and barely lower on the NYSE

Is this the way bull markets act — timid and oh so sorry for not respecting old highs? If so, the bears have little to worry about and much to laugh over. The chart action Friday was weak from a bull’s perspective.

The market will get a fresh test in the coming week, but the early grade is D. The only thing that spared the Nasdaq from an F was that it didn’t flee the all-time high area in a panic.



A backward trend in afternoon trading caused the Nasdaq to close in the lower half of the day’s price range. It would result in stalling — a subtle form of distribution, i.e., institutional-size selling. Volume increased across the board, which confirmed the stall-type distribution.

For the Nasdaq, it was the ninth day of distribution in the past several weeks. It’s an alarming number that indicates a crack in the market. Yet, the two distribution days this week have been questionable. Monday’s loss came on an increase in volume that was inevitable after Friday’s half session, and Tuesday’s stall didn’t have the look of institutions selling into strength.

Other indicators point to a normalized uptrend. The put-call volume ratio is below 1.0, but not by much; the CBOE market volatility index is back to its usual trend after spiking in early part of November; the ratio of the new highs to new lows is at a normal 2.0; and margin debt is normal as well. (These indicators are found in the IBD Psychological Market Indicators page.)

Some distribution days are getting dated and are set to expire within several days. With modest gains in the indexes, a few more distribution days could lop off the count.

Dist days: Naz 9, S&P=4

I am going to ignore Monday’s “distribution day” due to holiday issues.

One of the best aspects of the November market rally has been the productive gains that many stocks have made from breakouts. That’s a bullish shift from earlier in the year, when too often breakouts stalled out or resulted in unsatisfying gains.



Higher volume on both main exchanges meant that the Nasdaq composite and the S&P 500 chalked up another distribution day, or session of intense professional selling.

Yet the overall count, as seen in the Market Pulse table, stays the same because the Oct. 25 distribution day on both indexes fell on time. Once a distribution day gets 25 days old, it’s viewed as irrelevant.

While the distribution-day count on the Nasdaq is still unfavorably high, keep in mind that Monday’s distribution day is suspect since it compared Monday’s full session of trading against Friday’s half-day session. And the Nasdaq’s stalling day on Tuesday, the first such session in a long while, did not see the heavy turnover one would normally see when the market is about to make a major top.

While the huge jump in crude oil prices may cause some observers to fret about how it could impact consumer spending, Wednesday’s news on the economic front showed positive vibes. The ADP private sector job survey showed a much bigger rise in payrolls in November than expected; personal income in the U.S. rose 0.6% in October, also beating the Econoday forecast for a 0.4% jump. Consumer spending rose 0.3%, missing views for a rather lofty 0.5% increase.

NAz=9, SP=4 distribution days