Exposing Ideas to the Envelope of Serendipity

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Thursday, October 13, 2011

Time For a Breather

The market has run up hard and fast over the past seven trading days, with scores of stocks logging very big gains and with all the major indices getting some traction above their 50-day moving averages. However, we've now arrived at the upper end of the trading range that has contained the action since late summer, where there is considerable resistance. Additionally, the McClellan oscillators are getting very stretched, indicating that stocks are "overbought" on a short-term basis and need time to consolidate their big gains. It would seem prudent to anticipate some degree of retracement, or at least consolidation, near-term. On the positive side, the basing patterns being put into place are constructive and have the potential to support a new leg up once the existing overbought conditions are worked off.

Trade well.

-- Brinkley
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