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.