Stock Market Closes in on All Clear Reversal Signal

Contrarian analysis pays off once again. Let’s see if the bulls will finally take over this market.

Everyone hates this rally. The bears are dominating the discussion and remain quite evident on sentiment surveys. And the level of pessimism doesn’t seem to be fading with any urgency. From a contrarian standpoint, trading in the present, one day at a time, as stocks rally on a nearly daily basis it just doesn’t get much better than that.

Image courtesy of smallbizclub.com

There are still some things that need to happen for this bullish trend to stick, not the least of which is some help from the Fed and some sort of good news on any front. That said, if you’re trading day to day, today is a good day.

Of course, there is no guarantee that today’s bullish tone will stick. That’s because there are still plenty of things out there that could go wrong as Black Swans cloaked with stealth technology are likely flying around.

And yet, the New York Stock Exchange Advance Decline line (NYAD) is closing in on a new high as the market’s breadth is swamping the major indexes whose performance is distorted by heavily weighted large cap stocks.

As the price chart shows, NYAD has broken through its old highs on an intraday basis. If this sticks by the close, or eventually happens within the next couple of days, it’s likely that we may see a totally different tone emerging in the markets.

Contrary to the mainstream view, I’ve been steadily adding positions to all three of my portfolios (Smart Money Passport, Smart Money Passport ESP, and the Weekender Portfolio, see links below for full details). Perhaps what’s most interesting is the lack of enthusiasm which I’m detecting from subscribers. This goes along with the pervasive negativity expressed in the media, which has been highly reflected in the CNN Greed/Fear Index which hit a cycle low of 4 a couple of weeks ago.

Unbelievably, and still bullish, is this morning’s reading of 43 even as the NYAD is testing its new highs and the S&P 500 (SPX) is about to test its 200-day moving average near 5750.

What’s the bottom line? As traders we must keep our eyes open and build shopping lists during downdrafts in the market. That way we’ll be ready to deploy them when conditions warrant. Can things change overnight? Of course. That’s why we trade one day at a time. You can see all our current portfolio holdings with a Preview or a Trial of our service.

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

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For active trading, short term trading strategies, check out the Smart Money Passport.

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– will get you started along the right path.

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