This is just a guess but it will not surprise me if the stock market rally takes a pause Thursday.
Overall, the bias remains bullish with long-term breadth continuing to rise, and my buy signals based on price and volatility sill in place.
So why a pause? Why now? Maybe?
The ETF for the S&P 500 — SPY — is not only up three days in a row, it has now been overbought for all three of those days. The last time it was overbought for three days was September 1st going into the holiday weekend. On the Tuesday following the holiday, the market took its deepest setback in this latest advance from late August. And while this bull market has been relentless even in the face of any indication it might turn down, short term breadth turned down today at an overbought level itself (see the red box in the upper right of the chart below). Many times when that happens as prices are shooting upward, it is the glimmer that there is weakness under the mask of the price advance, and many times it the prelude to a quick dip (look back over the chart for similar instances). Also, the stocks on my nifty-50 stock list have been slowly rolling over for the past two days, from 34 on buys to 27 today, another glimmer.
However, those glimmers may mean nothing at all and even if they do bring on a pause, or a sideways slide for a couple of days, it is no big deal. It’s going to take more than this to slow down long-term breadth (the straight up line with the black dots in the middle of the chart below). There are just too many positives so the market still has higher highs ahead.
Should be noted that AAPL filled an intraday gap from three days ago today down at about 158 and the stock finished near its high for the day. If it bounces based on that, as big as it is, then there won’t even be a pause in the rally tomorrow.
SWING TRADING SIGNALS:
PRICE: Buy. (Day 3).
SHORT-TERM BREADTH: Buy. (Day 3).
VOLATILITY: Buy, (Day 3).
LONG-TERM BREADTH: Buy(Day 13).
CNN MONEY’S FEAR AND GREED INDEX: (67 rising, greed level).
NIFTY-50 STOCK LIST: 27 Buys; 17 Overbought, 6 Oversold, 5 new buys today, 9 new sells.
Bellwether stocks meeting 5-minute day-trading criteria for a buy on the open Thursday: BABA, AMZN, NVDA, GS, TSLA.
(click on the chart for a larger view)