Excessive enthusiasm is beginning to creep into the stock market again. While a bullish tone in the stock market is always desirable, a frothy one is not.
With today’s action in the broader market, coupled with tomorrows looming Fed taper announcement, our Current Market Outlook is being downgraded to “Uptrend Under Pressure” with a yellow light. As of today’s close, our “Core Four” stands with 1 green and 3 yellow lights (see top of page) changing our light to yellow.
It appears that a massive short-covering rally is under way across many parts of the stock market. The bulls are pressing the bears, which makes both camps buy at the same time. A parabolic curve may be developing which could set-up a blow-off top sometime this year.
There are many “old adages” on Wall Street. One of the truer ones may well be “buy the rumor, sell the news.” Let’s see if that applies to tomorrow’s Fed event.
Remain on guard. A sharp reaction to the Fed announcement, happenings in DC, or the Virginia election is likely this week. At least one positive will emerge tomorrow that both sides can agree on: an end to the political ads for Virginians!!
What to do now? Enjoy the “reach for the sky” rally. But remain quick to cut losers and lock in gains if the positions break below 50-day mav’s on heavy volume. Closely monitor the US 10-year note rate as a “taper tantrum” tell in response to the Fed announcement.
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.
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