Bulls Have Their Work Cut Out, but Remain In Control

Breadth and volume were poor yesterday, which means we need to exercise caution. There are however some positives that could keep the market afloat for a while longer. Weekly charts on the NASDAQ continue to show strong buy signals and the prices, though choppy this week, have refused to break down through supports. Another positive is the fact that money is starting to flow out of the Dow. Recall that the bearish case was built on the fact that institutional money was parking in the Dow out of fear that a top was forming. With money moving back out of this dinosaur it indicates that fears are subsiding and that money has an opportunity to flow out of the blue chips and commodities (which continue to correct hard) into the broader market. The last positive for the market here is found in our scans. Scans today revealed a mixed picture. A number of stocks are showing strong inflows of money while another group of stocks that have been underperforming are showing strong signs of being oversold. Market tops are not marked by large numbers of stocks in oversold conditions. The bottom line here is that there is indecision here, but the bulls have the power to pull the market higher. Bears have a weak case and are losing strength, but the bulls have to capitalize. The correction in the commodities sector could influence the fed to tone down its hawkish comments, which could give the market a real boost from current levels.