The perennial pattern…

Is it me or is it every time equities pullback lately they are met with significant support and then they resume their uptrend? Let’s take a look at the past six months performance of the Dow (chart), the S&P 500 (chart) and the Nasdaq (chart). Seemingly, every time a pullback or a mini sell-off has occurred, one way or the other stocks find support and then continue to rally. Another key indicator is the 50 day moving average, this technical indicator has also provided a support zone for most of the indexes. The old adage “the trend is your friend” has never rang more true then the market environment we have been in.

This has been a text book trending market and if you have played it this way, congratulations. However, I think there are just as many investors and traders especially on the short side that are scrathing their heads and cannot figure out why this market is so resilient. Once again whether you are in a bull or a bear market, market sentiment can become an overpowering force and it is usually best to not fight the tape. If you beleive that equities are a bit frothy, then you always have the choice to sit on the sidelines until opportunities come to you rather than you chasing them down.

Good luck to all.