There has been a sharp stock market rally that began with 'spike' lows in the Nasdaq, Dow & Midcap indices and a 'double low' in the S&P, mid-way through last week. We advised covering shorts and buying long on that drop and now we advise protecting those profits. The rally has brought prices back up to where they were before the latest Covid 'new variant' scare but not all sectors have benefited.
There is no major resistance that we can see to the rally proceeding further, but there is some chance that a trading range will form. Accordingly, we would not abandon long positions but move protective stops a bit closer to the market.
The market measures that capture the larger stocks have rallied well, but those lower down the 'market cap' ranking have lagged behind in the rally.
The best support comes from the weekly compression signals in the SP400 (first chart below). These broke upward and were revisited on the drop last week. This is the normal operation of compression signals and 'buying the pullback' is a reliable way to enter an uptrend that has begun, as we often point out. The main reservation comes fro the weekly small-cap Russell 2000 shown in the second chart below, where a very recent compression sits above the market. It will provide an unknown amount of resistance.
Of course there is a well-established tendency for a 'Christmas rally' into year end, which may be enough to push prices through this resistance, which is another reason to stay long, but with closer protection.
Elsewhere, commodity prices have been mixed. We have been turning more sceptical about various crop commodities lately although we only have one outstanding 'short' recommendation - in Cotton. Now we add another, in Sugar. It compressed, broke downward and has now returned to that compression. This is almost always the best chance to 'get on board' a trend that has already begun. Sell.
All signals generated by software produced by our friends at Parallax Financial Research www.pfr.com