There is no shortage of folks trying to predict a top in this market. Despite all their great arguments, the market isn't paying much attention. The price action refuses to confirm the pessimism.
I have repeatedly suggested that the bearish arguments are irrelevant until the price action shifts. That brings up the question of what exactly should we be watching for in the price action to suggest a change in market character is occurring?
The first major sign of problems would be some weak closes. When the market stops trending upward all day and we close weak, that will be a signal that it's time to take the bears more seriously. Markets that close strong tend to stay strong. That is an essential element of momentum. If you look back at the intraday action since President Trump was elected, you will see just a couple of closes near the lows of the day. One was at the end of the year when portfolio adjustments were being made, which suggests that conditions may be ripe for that to happen again as the first quarter comes to an end.
I'm not going to try to predict when the intraday pattern of weak opens and strong closes is going to end, but I am going to watch it very closely. When it does start to shift, I'll be looking to make some bearish bets.
For now, the price action continues to support the bulls. When that shifts, then so will I.
Yesterday I posted a chart of Momo (MOMO) as a setup to watch. That setup is playing out nicely today. I'd like to see better volume, but the stock is hitting a new closing high and has a good shot at a breakout over the all-time high at $35.76.
While MOMO is working, there is very mixed action on my screens, with biotechnology not doing much and some of the high-momentum names like Applied Optoelectronics (AAOI) and Shopify (SHOP) taking hits.
Let's watch to see how this market closes. Until that changes, the bulls have the edge.