Coolhand's Market Analysis

I believe it is, although you can still find disbelievers.



After seeing the market walk up to the brink of what was looking like a potential correction during the most favored time of the year for stocks, the market has roared back over the past three days. In that time, the S&P 500 has risen about 4%.

We did get some domestic data early in the day. Third quarter GDP advanced a mere 1.8%, which is less than the 2.% growth estimated previously. Initial weekly jobless claims came in at 364,000, which was below estimates of 380,000 claims. Also, the final December Consumer Sentiment reading came in at 69.9, which was more than two points higher than the previous reading. Leading indicators were up 0.5%, which bested the 0.3% increase economists were looking for. Also out was the October FHFA Housing Price index which came in at -0.2%. That means housing is back under downward price pressure.

Here's today's charts:



NAMO and NYMO continued their advance, but moreover, NYMO hit a fresh 28 day trading high and that flips the Seven Sentinels to an intermediate term buy condition. But don't get too excited about that development. More on that in a moment.



NAHL and NYHL also continued to rise.



TRIN and TRINQ remained in buy conditions. Neither is suggesting more than a modestly overbought condition.



BPCOMPQ also rose and remains on a buy.

So all signals are back in buy conditions and NYMO tagged a 28 day trading high. That means the Seven Sentinels officially flip to a buy condition.

I am not bearish here, but I am taking today's buy signal at face value. Seasonality may very well propel this market higher into the new year and I continue to expect higher prices, but it's possible the buy was triggered primarily for that reason. Also, various domestic economic data points have recently been suggesting our economy is beginning to improve. That could also help lift stock prices. But these factors can quickly ramp up bullishness too, and given how quickly this market can turn I'd not get too complacent about the current advance. Normally, I'd expect a signal to last at least one month, but not under the current circumstances.

I did move 25% of my 100% S fund allocation to the G fund today as I want to begin limiting my risk as seasonality plays out. Don't read too much into that however, I am simply exercising some risk management because I can never be sure how far the market can advance or decline when it begins making a strong move as it is now. And I'll continue to rein in my exposure should we indeed continue to advance in the days ahead.

A quick note on sentiment; I am very interested in where we stand for next week. I'm seeing bullish sentiment rise too fast at the moment with our own sentiment survey tentatively holding over 70%, while the daily survey at Trader's Talk is showing about 73% bulls for tomorrow and that ain't good, but it's possible seasonality may trump sentiment here, but those kind of numbers are quite high (neither tally is complete however). Still, if those kind of numbers are showing up elsewhere, I may drop my stock exposure sooner rather than later.