Craziness has returned in the short-squeeze arena and has caused a willingness by investors to put more capital “at risk.”
As a result of those inflows, and a sufficient passage of time, the level of distribution (professional selling) has dropped off in recent days which moved one of our “Core 4” indicators to green yesterday and caused our Current Market Outlook to be upgraded to “Market in an Uptrend” with a green light. The TPM “Core Four” internal indicators now show 3 green and 1 yellow (see top of page).
In our post on May 26th, we wrote… “Despite the above discussion on low volume and multiple distribution days, we have to be open-minded and accept that the market can do whatever it wants to do, and that a sudden move to new highs on big volume would upgrade the outlook to green.” That move to new highs (on the S&P500 at least) is trying to happen today. Volume will be an important tell as to whether it has real staying power or not.
Unfortunately, as we write this, the financial stocks have reversed off their morning highs and are threatening to go negative already. The main indexes are giving back part of their opening gains too. What we don’t want to see today as “bulls” is a strong opening that ends negative. And especially not with higher volume!
We have to remain open to the possibility that this new green signal could be negated quickly by bad market action. If that develops, our signal would change back to yellow immediately. The math of the market will tell us when the environment is changing and if we are out of step with the new trend.
Technical food for thought: Investor margin debt is at the highest level since 2007. (Uh-oh!) The Put/Call Ratio closed at 39 yesterday, an extreme low (bearish) reading. The Investors Intelligence weekly Bulls/Bears release showed only 16.2 bears (negative). These technical realities deserve your attention and may be serving as a harbinger of nasty things to come. However, the trend is still your friend and that trend remains from lower left to upper right…for now.
On a positive note, the CBOE Volatility Index (VIX) remains below 17 and under its all important 50-day mav. The “fear gauge” is showing investor courage (Hmm). If that index moves violently higher in the next few days, be very careful.
What should investors do now? Continue monitoring the US 10 year note rate as an immediate inflation gauge. Be on guard for a vertical violation. Watch to see if the regional bank ETF breaks out of a cup base soon as a “tell.” If the daily number of new 52-week lows on the NYSE stays calm, you can too.
Have a Triumphant day! ®
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice.
©2021 Triumphant Portfolio Management, LLC.