Over the past few weeks, the indices have been pulling back from highs as they work off the extreme overbought conditions from early March. The bears, of course, are convinced that “the top” is in (whatever that means) and they continually point to matters such as politics, valuations, interest rates, etc. as evidence that the next great downward turn is imminent.
They may very well be correct. There’s no way to know what’s around the corner, and the fear of taking a significant and sudden haircut is always in the back of any investor’s mind. It’s important to understand the issues that could impact the pricing action and to have a clear game plan in place should the action deteriorate. So far, though, their dire warnings have yet to materialize. The bulls haven’t made any new progress, but the bears have been even less effective in gaining any sort of real toe-hold. In fact, even on days when the indices lose ground, the buyers still find reason to step up in the afternoon to close the market off session lows.
The takeaway here is that the trend remains intact, and that favors long-side trades. The set-ups are a bit sparse at the moment, but that doesn’t mean we’ll stop digging.
Let’s take a look at some charts:
At the time of this post, RevShark had no positions in any of the stocks mentioned.