Playing with Fire
The market once again moved sideways for most of the session before a late-day rebound unfolded. The indices were able to close slightly higher on the day, which extended the rally. This current bull rally (depending on the index) has lasted 35 sessions. Rallies often last 18 sessions without pullback.
Of course, rallies can extend past that average. But on the whole rallies typically do not last this long without pullback.
Volume continued to be abysmal. And I know I mention the dreadfully low volume nearly every day, but it's important to note.
Participation is critical in order to gauge the strength of a rally. Too often people will only look at the price movement to determine trend strength.
While price is certainly important, so is volume. And when you have one without the other, it's often a signal to be cautious.
I am especially concerned about the lack of investor participation because the indices are not only making new rally highs, but some are challenging pre-crash highs too. I mention more about this in the weekend video. How can rational traders/investors expect those indices to breakout above resistance zones established five years ago on 25% less volume?
Earnings were good and economic data hasn't been terrible. I don't want to be Mr. Gloomy. If anything, I am more bullish than most analysts out there. It's just been painful to watch the indices move higher every single session by a less than one percent, and sit on the sideline because I don't chase rallies once they trade into extreme overbought conditions on RSI.
You are playing with fire if you get aggressively bullish right now. Risk is strongly to the upside, meaning there is more room for the indices to fall than to rise higher from here.
Later this month I will begin to hold live education and stock analysis events, the first of which will be as early as next week Wednesday.
This could become a permanent feature too, depending on participation. I will ask you for tickers ahead of the video, but let me know if there are other topics you would like me to discuss in greater detail. Please send a few questions that you would like me to answer about anything finance before I jump into the live stock analysis. Email me at tradedesk@trademasterstocks.com.
