Sunday, December 14, 2014

Sunday December 14, 2014

$SPY What one can say about the past week, technically, stocks are now in short term oversold territory. The internal breadth of the market has been showing negative divergence of late and this past week the new 52-week lows hit triple-digits on both the NYSE and NASDAQ. The strange part of that is that the number of new 52-week highs was also in triple-digits for most of the week. The Market Model’s for the four indices which are followed uniformly turned to Sell at the Close Wednesday.

So what should we look for going forward? First, the broader market is still in a bullish uptrend and until support levels are broken the major trend is up. Next, keep an eye on the Russell 2000. The small cap index has been in a trading range and a move either above 1190 or below 1150 could provide the signal whether stocks are heading higher or lower.

On another note there was no trading activity in the Alpha One Model Portfolio and I am not anticipating too much in the coming week either. In my opinion a good amount of last week’s decline in values will ultimately be laid at the feet of professional portfolio managers who sold aggressively in an attempt to preserve accrued profits into the calendar year end. Most of the impact from the decline of Crude Oil should have been priced into the markets earlier since OPEC clearly signaled their intent in late November. Remain cautious, the recommended Asset Allocation Level is now 62.5% Long – 37.5% Cash.