Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Monday, July 26, 2010

A good day in the market...

Today was indeed a good day in the market. I closed out the 5 open swing trades - MBI, PMI, RDN, BYD, & CIGX - and moved them down to the closed trades section. The four limit buy orders I mentioned over the weekend went active this morning and executed in early trading and are updated this evening. I am stil holding the SSO & QLD from 7/20. I was expecting and hoping for a slight pullback this afternoon but instead the advance decline climbed even higher closing at the plus 3823 (seriously overbought level). The SPY ETF (S&P500 tracking stock) the single biggest collector of money moving into the stock market is of some concern as its daily volumne has stair stepped down for the third day in a row. Anytime the price of an instrument is climbing but the volume is descending across the same daily bars, a bearish divergence is taking place and a serious pullback is usually approaching. The market can remain short term overbought for longer than reason says it should. When I scan for new swing trade entry points tonight I will have to raise the bar on what I consider high quality setups. My trading rule is not to open any new trades when the advance decline ratio is so seriously overbought. I also have to take into consideration that a lot of people are just now realizing the market is moving up and there will be a lot of people chasing it. If I find a stock with an extremely high quality setup, I will post it later this evening. Sometimes I have the opportunity to stop by my office during market hours to check on the trades. If I open or close trades intraday, I will post them at that time. If anyone would like an email update anytime I do that, just let me know.


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