Monday finally saw a rally that followed typical correction formats. The market jumped at the outset and then sold lower early morning. When that ended the market climbed back over a period of several hours to move higher than the opening high in choppy fashion. The close saw some weakness but the ended with a significant rally of 1.39% and a decline in volatility by 50% from the recent high of 50.30. It closed at 25.61.
So what does the Market Breadth Indicators tell us about Tuesday? Let’s take a look.
Market Breadth Indicator Outlook For Tue Feb 13 2018
S&P New York Stock Exchange Review
Volume fell back to 4 billion which is still very good volume but a bit disappointing as the rally on Monday would have been stronger if volume had been at 4.6 or 5.0 billion.
This makes the rally on Monday weaker which means some weakness has to be expected on Tuesday.
There were just 12 highs which is understandable after the correction dropped the market below 10%. It will take some weeks to get new highs rising again.
New lows fell below 100 which is excellent. However if you look at the chart from last week you can see that Wed Feb 7 saw 43 new lows and a stronger point gain for the rally. Monday’s point gain was great but not as high or as strong as last Wednesday. Again the rally on Monday is a bit suspect.
71% of all stocks were climbing which is the best number since the start of February. This is bullish.
The Market Breadth Indicators at the lose are advising that Monday was a nice turn around day and Tuesday should be higher as well but caution should also be exercised as we could and probably will see some dips which may be a bit deeper than expected. The close though should still be positive but the open on Tuesday is probably going to be lower.
NASDAQ Review
The NASDAQ vfell back to 2.2 billion. Just as we saw on the S&P, volume dropped off in the rally. This adds in weakness for the follow day.
New highs were 31 which is the highest level since the start of the month. New lows fell to below 50, an excellent sign for the bulls.
Up volume was 78% which matches the rally up volume from last Tuesday, Feb 6. Down volume was just 22% which is bullish, but then again it matches the down volume for Feb 6 but the market then fell Feb 7 and 8 after the rally.
Advancing stocks were 64% which once again matches the rally on Feb 6 as does the declining stocks at 35%.
So what we have seen is a rally similar to that from Tuesday Feb 6 but with considerably less of the strength from Tuesday.
That leaves Tuesday as weaker so we are probably going to see the NASDAQ open below Monday’s close and then try to climb. I would expect the climb to be sold against and the index to fall lower. From there I am expecting a choppy sideways fight which eentually will end with a gain for the NASDAQ by the close of trading on Tuesday.
General Outlook for Tue Feb 13 2018
We should see more selling on Tuesday and more dips in the markets. Choppiness will continue but the close should be modestly higher for the indexes.
Market Protection Outlook
The need for protection is high for the second week of February 2018. Stay cautious. Remember, not trading is also a position as is raising cash levels for trading in the weeks ahead. The Market Direction Portfolio is holding spy puts in the event the market moves lower.
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Remember that you always trade at your own risk. Judging market events which can impact the direction of equities will always have a large chance of error as trading in equities is more emotional than fundamental even at the best of times. Read the full disclaimer.
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