QQQ short term up-trend reaches 18th day; put/call ratio: 1.07; ASPS break-out


The put/call ratio and investor adviser sentiment help to prevent me from making mistakes at market extremes. When the daily put/call ratio is 1.2 or higher there are too many people betting on a decline, and the market bounces.   The ratio was above 1.0 yesterday, still showing a lot of bearish bets (more puts than calls). Similarly, when the Investors Intelligence poll shows many   advisers to be bearish, the market tends to find support or rise. Recently we had a rare period when there were more bearish advisers than bullish advisers.   This pattern gave me reassurance recently to stay long and follow the GMI.   There are now more bulls than bears (43% vs 37%, but the number of bulls is far below the 50-55% level that   typically occurs for long periods during advances.   Thus these sentiment indicators reflect a lot of bearishness and suggest to me that there is   more up-side to come.   The one major negative indicator is the Worden T2108, now at 84%.   Most of the time a reading of 90-92% occurs at market peaks.   But given that most stocks have done poorly of late and are depressed, the fact that so many are now above their 40 day average price may not be considered to be extreme in the current rally.

Check out the nice cup-with-handle break-out on ASPS last week.   Note the high volume confirmation of the break above the handle. The trick is to find these winners just as they are breaking out. (Click on weekly chart to enlarge.)

I am watching ULTA for a possible cup-with-handle break-out in the 73-74 area. I am using TC2000 to set an alert to tell me if ULTA gets near a break-out. (Click on weekly chart to enlarge.)

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Worden T2108 is at 86%–very overbought


The GMI is at 6 and the QQQ short term up-trend completed its 14th day on Friday.   Some short term up-trends have lasted more than 80 days.   However, it is rare to see 86% of NYSE stocks close above their 40 day moving average (T2108), although T2108 has reached 92% before. I remain invested long, nevertheless, until the short term trend   reverses to the down side. Twelve stocks that hit a new high on Friday and passed my scan are:   STMP,BKI,NUS,MANH,FAST,HITK,ORLY,WPZ,ISRG,PSMT,RL,SPRD.   Research them.

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