Market continues to be extended by many measures, that at times means something other times it doesn't. The longer your time frame the more irrelevant these short-term measures are. One interesting breadth measure that confirms that we are extended is Pradeep Bonde (Stockbee) breadth measure of how many stocks are up +50% or more in the last month. That number is now at 35, typically above 20 signifies a hot market and this when momentum starts to wane.
With the above being said; the questions as trader that you ask yourself are;
- Do you take the trades at regular size and disregard the breadth numbers?
- Do you reduce size to take into account the breadth numbers?
- Or do you not take any trades until we consolidate further?
- Fact is, we won't know what is the correct thing to do until after the fact.
Below are the stocks on my watchlist today that I have an interest in on the long side if and only if they go through yesterday's high.
Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at email@example.com or 646-480-7463.