How Long Can Market Maintain Upbeat Action?

 | Apr 20, 2017 | 4:17 PM EDT
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IWM

A few weeks ago, action like we had today was typical. There would be a slow start, a slight dip and then the buyers would step up and the indices would close near the highs of the day. The action today was that same pattern that we haven't seen recently.

However, since March 1, the market's problem has been the inability to build on solid action like this. Breadth was good, volume picked up and the mood was upbeat. It was the inverse of yesterday, when the atmosphere was quite dreary.

The question now is whether this time the bulls can build on the strength. The market has not had a good record of follow-through recently. The spike on Monday led to a gap-down open the next day and the spikes in March fizzled very fast.

While the gains were quite good today, the S&P 500 stalled right at its 50-day simple moving average. The DJIA, which was on the verge of a lower low, was saved but is still in poor technical shape. The Nasdaq continues to lead and the small-caps (IWM) are surprisingly strong.

The problem we have been faced with recently is inconsistency. One day's action is not at all predictive of what will happen the next day. That is why trading has been so difficult recently. The bulls have an opportunity to prove themselves tomorrow. There is no reason to be too optimistic, but at least there were some stronger emotions and that is always good for trading, especially when they are positive.

Have a good evening. I'll see you tomorrow.

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