Joshua Hayes'  Instablog

Positive news regarding retail sales and a surprise tick higher in Empire manufacturing helped set a positive tone for the market.  It was another session where stocks were under heavy accumulation.  Price gains weren't overwhelming, but the amount of volume that did show up suggests the big boy institutional players were supporting stocks.  Volume was much higher across the board and above the 50dma a good sign showing the appetite for stocks remain.  Leading stocks, again lead the market higher on volume confirming the move higher.  Once again the market continues to march higher as all the ingredients for gains continue.

Our approach continues to be stock by stock and not letting any bias influence our trading.  We may be overbought, but we can remain in overbought conditions for a very long time.  This does not mean we do not take profits along the way, but just because we have gains we don't simply take the entire position off the table.  We have the makings for stocks to run higher and we want to be able to take advantage of that.  Trading scared will only leave gains on the table and could lead to chasing performance later on down the road.  The greats like Wychoff, Livermore, Darvas, Dryfus, O'Neil all had the ability to hold for gains.  Remember, it is wise to take profits, but unwise to take the position off the table if it shows you strong gains.

As I stated in last night's commentary we are seeing the number of stocks over their 20dma near extreme overbought conditions.  Today it is now over 81% nearing 82%.  This is suggesting we will experience the market pull back and consolidate its gains.  We are pretty darn close to extreme overbought conditions and it would not surprise me to see the market take a rest here.  With the market having very little distribution days, the NASDAQ having 0 we will not see a significant pull back.  Until we see heavy distribution days piled up in close proximity we will not see a significant pull back despite calls from market pundits for a pull back.

There were 7 new lows today, but on the flip side there were 538 New Highs (NASDAQ and NYSE).  Five new lows were made today compared to yesterday, but this is hardly anything to get excited over.  The fact that 538 new highs were made on the NYSE and NASDAQ far outweighs the number of stocks hitting new lows.  A few market pundits like to point to the fact that we have a lack of new highs compared to 2007 or even 2005, but we forget we are coming from one of the worse bear markets in our history.  Things will simply not be as you'd expect for a bull market.  In time, if we can see a healthy correction we may begin a more "normal" bull market.

Remember, to keep your losses small and let your winners run.

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