Coolhand's Market Analysis

Originally Posted by coolhand

Well, the bulls were moving right along until Thursday when significant selling pressure manifested. Like myself, some of you were noting that there really wasn't much to pin the selling pressure on (where did it come from?). It really doesn't have to have a narrative. The action was bearish and could be an indication of any number of things, but political pressure is probably near the top. I'm not going to unpack that and will let that statement stand on its own.

The fact is, we have to navigate the market regardless.




Friday's action saw price test the rising 50 dma on the DWCPF and bounce well off that support line. Price did not test the same support line on the S&P, but it might during this next week. Volume has been higher than normal since the selling started (another clue).



Interestingly, breadth is not falling apart, but is instead dancing sideways. I view this a neutral, but if the selling doesn't stop, this indicator is likely to begin falling into bearish territory.

NAAIM was less bulled up last Thursday, but they were still bullish. We only get one reading a week on this sentiment measure so we have to keep that in mind. This group of money managers can change their sentiment at any time, but we won't know it till the next reading is given. I note that TSP Talk sentiment got even more bullish. In the current context of this market, that may be problematic. Ordinarily, with NAAIM bulled up I'd not give the TSP Talk reading a second thought, but we may be in the beginning stage of a change in market character (stress "may be").

I am going neutral given the mixed picture, but also because the selling pressure does not appear to be organic. Caution is now warranted until we see some degree of stability return. I also want to see where NAAIM stands on the next reading, but that's toward the end of the week.