please read disclosure

Yesterday’s market action was impressive and marked the first 90% upside day (up volume was ninety percent of Up/Down volume) since a similar occurrence (source Lowry) on November 9th, 2009. What is interesting is that both up days occurred approximately one week after similar 90% down days, and although the market consolidated for over a month after the November surge, nevertheless, the bottom was in and eventually a breakout to the upside lead to new market highs confirming the primary trend. Whether yesterdays’ action indicated a sufficiently sold out market that will lead to new highs can only be left to conjecture, the fact that buying pressure jumped by 12 points, and selling pressure dropped by 14 was even more impressive than the November 9th rally. Although the market is now once again overbought on a short term basis, making a pullback probable, the odds that a sustainable bottom has been put in appear to be good. If the market can continue to move higher despite the overbought condition, further evidence that we are in a position for a new leg up would be arguable. Here’s hoping.

please read our disclosure

Based on fundamental as well as technical factors, I’ve added an ultra short ETF to hedge our emerging market equity exposure. Whether fundamental or just psychological, the recent tightening by the Chinese authorities has cast a pall over emerging markets who are so dependent on China’s imports. While there are still no serious economic downturn worries; nevertheless, I feel it prudent to add this tactical flywheel to our portfolios until the fundamental and technical indicators take on a more positive picture.