Stalling Action

Today is what I classify as a day of stasis when the difference between buying and selling was negligible. This in and of itself is enough for me to take notice as it suggests that there is an impasse between buyers and sellers as neither is showing much interest in altering the flow of supply and demand. As I wish to be on the side of the buyers, the lackadaisical atmosphere of today coupled with yesterday's minimal buying leads me to believe that the market is going to have some issues moving much higher here.

Besides the lack of buying, there were three additional flags that are reddish in hue alerting me to caution. The current leg up commenced 10 sessions ago on 03/07. At the time the 10 day breadth was .66 and the 5 day breadth .33 indicating that selling was dominant over the referring periods. This selling can be seen on 03/06 with 384 stocks down 4% on that session which was also brought most of the indexes down over 1%. The following day some buying came in and continued over the next 5 sessions with a 390 4% up day on 03/13 which led to a thrust on the 5 day.

Breadth Ratio

At that point, the preponderance of evidence indicated that going long was the path of least resistance.

This was confirmed as buying continued with mostly positive days of 3-1 buying to selling. However the first red flag was raised as the persistent issue of the last thrust pestered with follow through days lacking. So while break outs were looking promising, holding for more than a day was likely to give up gains. The second red flag is that this move commenced 10 days ago, so having a 10 day breadth thrust now, especially when it's the result of a large day falling off rather than large buying days is to be viewed suspiciously. Lastly, coupling a 10 day thrust with a falling 5 day thrust warrants concern.

Broken down, the breadth is currently informing me that market risk is increasing here and the likelihood of consolidation or a pullback is an increasingly probable scenario. Currently each dip has been quickly bought so my expectation is that over the remainder of this week we'll begin to see this scenario play out and should it proceed as anticipated, situation specific reevaluation will be the next step.