Friday, June 6, 2008

Market Resumes Uptrend?

IBD has called for a resumption of the uptrend based on the action of leading stocks yesterday. However, by definition a follow-through occurs when one or more of the major indexes advance 1.7% (this has changed over the years) on increasing and above-average volume, which did not occur yesterday.

I think IBD is premature in calling for a resumption of the uptrend, particularly given the comments surrounding the last market call. ( See the previous post ) The Dow Industrials and S&P 500 remain in downtrends and Oil appears to be heading higher again. While many leading stocks did fare well yesterday, the rally was very narrow.

Look back to early 2006 and 2007 and you will see other instances when the market behaved this way, only to be followed by a selloff. My best estimate is that the markets will top out today or Monday with a low in late June followed by a last speculative surge before beginning a greater selloff. Nevertheless, we will follow the signals and not opinions.

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