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How Long Can This Go ON ? December 10, 2016

Posted by Tom in Thoughts.
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Dec. 9, 2016 – “How long can this go on? Lord I’m so tired!”  Lyrics from “Work’in In The Coal Mine”, but hopefully you get the idea.  The point being that since the election (11-8-2016) the S&P 500 has gone up 5.61% . . . .  that’s an annualize rate of 86.81%.  Does anyone believe that a year from now the S&P 500 will be up 81%?  OK, then.  While I’m not predicting gloom & doom, I do think that this steep rate of increase is unsustainable for much longer.

That said, the issue now is how much longer and what next.  The chart below is (re) labeled as a possible Distribution structure; that is selling.  The UTAD is “Up Thrust After Distribution”.  Now we may not have seen that Distribution in its entirety, but we could be getting close.  Why?  Because of those narrow range bars late last week.  Narrow ranges mean that buying and selling are about equal, and after a healthy run up, that means a pause or a possible change in trend.

nasdaq

The problem is we don’t really know just yet which it will be.  Money Flow is neutral, Volume Flow is somewhat positive and Sentiment remains Bullish.  The volume bars in the lower screen show average volume, so no panic to sell yet.  We’ll just have to watch how price and volume acts when we get a pull back.  IF volume increases on wide range down bars, I’m “out a here!”  Let’s keep an eye on the 5250 area for clues.  Every minor pull back has been met with buying and the end of the year is coming with the hope of lower taxes next year .  Any significant weakness may have to wait until after January 1, 2017.  But  . . . be careful the rest of this year.

This is what an “over bought” market looks like (% of S&P 1500 Stocks) . . .

Price Strength:

price-strengthCurrent Accumulation / Distribution:

a-d-sp1500

There’s a lot of green up there.  The question is how much more “buying” (money coming in) is there to go before everyone is onboard?  That’s something to think about.  Next, what sectors are moving the most & strongest right now:

leading-sectors

No real surprises here either.  So I’m “riding” this rally for as long as I can, but we could be getting late in the game for a significant pull back.  After that, does the buying resume?  We’ll see, one step at a time.

For further Wyckoff analysis click here: http://stockcharts.com/articles/wyckoff/2016/12/there-are-no-free-lunches.html

The next two week are very busy for me, so I’ll try and post what I can, when I can.  Please be patient; and have a Happy Holiday.  …..  Tom  ….

Price chart by MetaStock; pie chart by http://www.HighGrowthStock.com; used with permission.

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