Equity Markets Finally In Confirmed Uptrend. Oh, that can be confusing, or you might just call me a Monday Morning QB. How could the markets not be in a confirmed uptrend sitting at all time highs (SPX, Dow Industrials), or near multi year highs (Nasdaq)?
The question is, why has it taken so long? After all, we have been making new highs for weeks now, yet the confirmation only came the day after Memorial Day. So, is now the time to be buying?
As a longtime follower of William O’Neill and his publication the Investors Business Daily (IBD), I will constantly follow their tracks in helping to formulate my trading strategy. It’s not the end all but it has been a proven approach to getting a solid read on markets (other than my own). They do not advocate trading options or shorting stocks and trade with a strict discipline of not losing more than 8% on a stock position.
Getting back to the confirmed uptrend. IBD had the market in correction for a near record 48 consecutive days until May 28th. Why in correction? Simply put, the price action was not accompanied by strong turnover, a sign of institutional sponsorship. Regardless of your view of HFT and price maker action it is the big institutions that make up 80% or more of the volume. When they are involved then I also want to ride their coat tails.
The big rally on Thursday may not have been telegraphed but with the support of strong technical signals (they were pointing higher), mixed sentiment and hungry buyers to get prices moving and confidence – there was no reason not to expect this reaction to news (in this case, ECB action). The market tells us how to proceed.
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Bob Lang has been managing private options trading accounts for clients since 2004 and providing subscribers with guidance on trading options for income at Explosive Options since 2011. Connect with Bob Lang on: Twitter, Facebook, Google+, LinkedIn.
Related Reading
Read the exclusive TraderPlanet interview with Investor’s Business Daily founder: Bill O’Neil here.
