Persistent upward momentum but still short term risk ahead.

Stock market ended the week about 1.5% higher than the previous week with about an 1% pullback at the early part of the week. With the persistent upward momentum the last two weeks, this lessen the possibility of a big pullback correction back to the November lows 2+ weeks ago. Given the short term overbought there's still chance of some consolidation/pause or pullback. If the strong momentum continues then there could be no more than 1 to 3% pullbacks as the stock market make a slow move higher. With the uncertainty for the moment I don't intend to trade more than 20% of my portfolio this week (unlike 2+ weeks ago when I was 100% invested based on the medium term buy signals at that time.)

Now at short term overbought after a nice rally

Got the rally as stated from the last post. At levels where a short term correction or consolidation should occur.

Failed short term oversold leads to medium term oversold

The short term oversold signals of the past months were very weak as the market sold off more afterward. Now the stock market is at medium to long term oversold levels similar to the bottom that occurred last summer. As from the beginning of June there should likely be a short term rally that eventually turns back down for a final lower low. We see what happens in the weeks ahead as this could set up for another good medium term rally in the coming months.

Oversold rally expected but at important support...

Since last post in August of an overbought signal, the major indexes consolidated with minor pullback before heading higher. Did get another overbought signal by mid September which this time resulted in a larger correction. This time the stock market is getting its first oversold signal since mid to late July...so it's being a quite some time which indicated an uptrend momentum for the past few months. So a rally is expected at this level here but an important support level have been breach downward in some indexes (Nasdaq, Russell 2000, and Nasdaq 100.) The Dow and SP500 are at their support levels and haven't broken downward though. If the major indexes can hold at current level this week then an oversold rally is expected but further breakdown lower could indicate another leg down for the stock market. So watch the SP500 to hold at the 1420 to 1430 level  and also for the other major indexes.

Another short term overbought...

From the comment of the last post I was looking for a short term rally but a bigger move back down before making a bottom. Well, did get the rally but the move back down was minor as the next move afterward was higher and now has the major indexes getting back toward their highs of the year. Presently the stock market is short term overbought though I have the trending momentum still up. Hard to tell from here but I if I had to trade on the upside there is a bit more risk so a very small position is advised but at the same time a small short position isn't out of the question too.

Bumpy summer rally...hints of trouble?

Expecting a good rally from the medium term buy levels from mid to late May thus far have been a bumpy road up. Not the kind of rally I was expecting as this is usually hints of lack of strength. Today the market has pulled back and if it doesn't recover back higher soon then I would expect a larger correction back toward range of the May lows.

Unexpected selling into medium term buy level

There were much more selling than I anticipated in the past week. So much that the major indexes are now within +1% of their 200 day moving average. The last two years the longest they went without touching their 200dma were over 10 months but looking at the chart has the SP500 just almost 5 months. So this year got the usual "Sell in May, go away" in anticipation of buying back in October? Or the selling is setting up for a summer rally? Each year there are usually one to three medium term buy signals, the current selling of the past month has set up the first medium term buy signal of the year. For the near term, if there are more selling then the 200dma (the red line) should provide major support.

Last week's sharp correction

Did I see a short term correction early last week? Not really despite there were a few indicators nearing short term overbought which has been the case much of this year. On the medium and longer term horizon, I don't see hints of larger correction or a bear market is upon the stock market. Still I was caught off guard with the correction last week but I am confident this is a short term one and should see some upside when this bottom process completes in the coming days or even weeks.

2nd oversold buy setup of the year

I failed to note that early March was my 1st short to medium term buy signal of the year. At that time I added a comment to that post of a brief rally thinking a retest lower (and trigger the buy signal) would occur which it didn't happen. Only difference was that the this past week's correction has been more deep resulting in the major indexes to finally retouch their 50 day moving average (only the NDX, Nasdaq 100, is still +1.5% above its 50dma.) So what now? The setup is there for at least a short term bounce if not a medium term move higher. The chart included is what I'm anticipating... a brief rally and then move down back toward today's low and possibly lower before getting A bottom. That's the scenario I'm looking at. Of course there are the best and worst case scenarios but those are the extreme ends of the bell curve.

SP500 within its 50 day moving average

Couple posts ago I noted that the major indexes could continue higher slowly while majority of the individual stocks will struggle by either consolidating or pull back more on corrections... but the major indexes will eventually start moving lower. And this was the classic internal weakness that has occurred since my last post as the major indexes has finally pulled back in this past week. The SP500 is within 1% of its 50DMA as the stock market has entered oversold conditions. This condition should lead to somewhere between either a quick bottom and rally OR a bottom process that will require more downside probing before an eventual rally. I'm anticipating the latter.

Looks like a breakout higher...

My added comment from the last post called for a brief rally. Instead it has been a very strong breakout higher as the major indexes are making new 52 weeks highs. I would had expected the major indexes to pulled back more to retest their 50 days moving averages but hasn't yet. The European and Asian stock markets did do that last week. But the U.S. stock market has outperformed and can on rare occasions will just pull back close to but not touch their 50 DMAs. Still, even though the stock market could continue higher I would be cautious of possible swift pull back to the 50 DMAs.

short term calls for a likely pullback

From last post the SP500 and the rest of the major indexes did moved higher. The SP500 1370 level was where I was looking for whether it'll hold or not but I was expecting maybe another 1% higher to get the bears to throw in the towel. Maybe it did or did not. Well anyway I have provided a chart that shows the SP500 since the March 2009 bottom with the blue line being the 50 day moving average. I have also drawn short red lines to shown how long the SP500 went without touching its 50 DMA. The longest has usually being 2 to 3 months so currently it's at 2 months and I expect the SP500 (along with the rest of the major indexes) will return to the 'mean aversion' and head lower for the short term to touch their 50 DMAs.

update of last post: could be short term bullish

The last post looked for a short term pullback from 3 to 5%. A week has past and thus far any intraday pullbacks has be met with buying soon after. The Nasdaq and NDX 100 are up +1%. The Dow, Russell 2000, and NYSE Composite are down less than 1%. While the SP500 is up 1/2% with its last year's highs ranging in the 1350 to 1370 level. Thus far the SP500 has held up well at the 1350+ level this past week. Despite some hints of recent internal weakness of individual stocks compared against the major indexes, which means if any selling can't bring the stock market down now then it'll delay it for later, the current consolidation could evolve into another rally higher for the short term. The Nasdaq and NDX 100 are the current leaders but will see whether the stock market will be able to hold the gains if and when the SP500 reaches the 1370 level.

Note: Thus far the posts from August to November of last year have worked out very good as the calls for a long term bottom and rally has been rewarding to the upside. You can go back and review the calls for a bull market while most were fearful for more downside in the coming months.

bullish momentum encounters resistance

The stock market had a nice rally since the last post with over +10% move for the major indexes. The Nasdaq has exceeded last year's high and the Dow is just at last year's high. So this market action could hint for more bullish move higher later in the year. For the short term, and possibly medium term, there could be some caution for the stock market as the SP500 is still a few percentage points below it's 2011 highs. If this were to be the case of either a pause or a bigger correction then there should be buyers below the SP500 1300 level (with 1250 being strong support.) On the other hand, if bullish momentum continues to overpower any brief weakness than there could be just a slow move higher.