Stay With Your Plan

Last week, the market has been making consecutive new high and one should not be surprise to see a pullback after last week’s performance. Although the market is long overdue for a typical correction in the range of 8-10%, but it doesn't seem likely to happen soon. When a pullback does appear, expect it to be shallow(shadow) and brief. Furthermore, expect to hear those market top callers telling us the market has topped. But as any experienced market watcher would tell you, the recent market behavior is nothing near a market top. This does not mean a top might not be near, but the recent market high is not a top.

As shown in the following chart, all the market indices closed at a new high last week with the exception of the Russell 2000 which missed its previous closing high by half a point. And for those that follow the Dow Theory will have noticed a confirmed new high for the Dow Jones Industrials. This implies a newer high is expected from the Dow Jones Industrials.

(click on the chart to get an enlarged view)


The breadth of the market has also been strong. There is a slight deterioration on the NYSE A/D from the last trading session, but not enough to be alarmed. This slight weakness could be a warning of an impending pullback.



The breadth in the Nasdaq also continues to strengthen, and this seems to reflect the recent strength in the tech sector.



As the market zigzag its way to higher high, pay attention to the message it will send to alert us to prepare for exiting. Until then, continue to trade according to your trading plan.