The last trading week of the year is seeing what appears to be profit taking and tax shifting as we wind down 2020.
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Both the S&P and DWCPF were lower today. Notably, the S&P was hitting fresh all-time highs early in the trading session, but could not hold those gains. The DWCPF went lower quicker than the S&P. It was more like a bear ambush within minutes of the open. Still, the technical damage is limited to this point. The S&P doesn't have any technical damage to speak of, but the DWCPF shows momentum going negative, which is obviously bearish. However, RSI has finally fallen out of overbought territory after spending more than 5 weeks in that area. The question is, how much more selling might we see? I suspect we might get another couple of days worth and then things may change next week, but I'll know more when we get a fresh NAAIM reading.
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Cumulative breadth took a hit, but is still technically bullish.
Despite the selling pressure, there is nothing particularly abnormal as far as market action goes. Especially as we wind the down the year and quarter. It's also not a surprise given how far the indexes have gone; especially the DWCPF.
It is too soon to get bearish on the action as it may be short term. NAAIM will tell us more about risk in another couple of days. For now, I remain bullish.
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