Momentum Monday Update – Is the Buzzsaw Coming for the Bears? Plus, Two New Momentum Picks.

If this scenario holds up, we may see some real fireworks.

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Stocks liked the Fed’s current stance of holding steady but rescinding its qualitative tightening activity (QT). The net effect is to increase liquidity without increasing the money supply via QE. It’s a partial and behind the back sort of easing, which seems to have gone over well.

Certainly, this morning’s recovery suggests that there is some dip buying going on.

But what I’m really liking, until proven otherwise, is that even on days when stocks go up, that CNN Greed/Fear index (GF) stays in the low 20s. This morning it’s at 22. That means that the bears are still not believing that this market can rally. Of course, they may be proven to be right. But, if they’re wrong, as I think they will be proven to be if this trading pattern continues, they’re going to be caught by a short covering buzzsaw which, if it occurs, will send stocks flying higher in a hurry. It may not come to pass, but so far, as I’ve been noting for the past couple of weeks I’m liking what I’m seeing.

As a result, I’m not a bull or a bear. Instead, I’m taking on the attitude of a wolf, by focusing on what’s working, shortening time frames to a slight degree, and staying nimble.

On Monday, I added three new picks to the Momentum Portfolio. On Tuesday I added several picks to the ESP Portfolio, which are acting well. Today I am adding two new Momentum picks.

Market Update

The New York Stock Exchange Advance Decline line is testing its 50-day moving average. This morning it’s back above the line after initially pulling back. NYAD spent much of the day above the key resistance level yesterday. A successfully sustained move above this key resistance level should take stocks higher in a hurry.

Meanwhile, the U.S. Ten Year Note yield (TNX) is heading decidedly lower and seems headed for a test of the 200-day moving average and possible the 4% area. This precipitous decline in bond yields suggests bond traders disagree with the Fed’s latest inflation forecast which calls for a tariff related increase.

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