Momentum Monday Update: All Clear Expands as We Trade One Day at a Time

Plus a new momentum pick which is setting up to be squeezed higher.

Image courtesy of jtrader.com

The market is improving. But patience and caution are still warranted. We trade one day at a time.

Yesterday I noted that the New York Stock Exchange Advance Decline line (NYAD) was in the early stages of an “all clear” signal. Specifically, I noted NYAD was closing in on its 50-day moving average. This morning, NYAD is expanding the “all clear” signal, having crossed well above the important resistance level. Of course, in a headline driven market there are no guarantees and a nasty reversal is always in the cards. Yet, given the persistent bearishness of the current cycle, there is plenty of opportunity for this market to rise based on short covering. That said, if there is enough short covering then the buyers will likely return as they fear missing out on a lasting rally.

As a result, I am slowly deploying the best candidates in my shopping list while keeping a close eye on them once they’re active, in case the market reverses to the down side.

Market Update

The S&P 500 (SPX) is setting up for an attempt to move above 5450, which would be a short term confirmation of the NYAD’s “all clear” signal.

Moreover, the New York Stock Exchange Advance Decline line (NYAD) has blasted above its 50-day moving average signaling that the intermediate term trend for the broad market has reversed to the upside. Note also that the CBOE Volatility Index (VIX) is below 30 as fear eases.

The U.S. Ten Year Note yield (TNX) is still quiet, trading just above its 200-day moving average. Note the Bollinger Bands are in the very early stages of a potential squeeze. If this squeeze progresses, expect a major move in bonds.

This morning, I am adding a new Momentum trade in a stock which is nearing a potential breakout.

Thanks to everyone for your ongoing support. I really appreciate it.

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