Saturday, December 13, 2014

A Tale of Momentum & Inertia

The Market Trend Model (http://bitly.com/M_Trend_Model) moved to a negative bias this week as the major indices came under some significant distribution.

At the moment the S&P 500 is the weak index as it ended the week below its 10-week moving average on an increase in volume.  Continued selling in this index may mark the beginning of a prolonged decline.

On the flip side, the Nasdaq remains above its 10-week moving average and its relative strength line actually moved into new high ground, as noted by Kevin Marder (https://twitter.com/mardermarket/status/543582500371460096/photo/1).

The strong selling this week has placed the market in an "oversold" condition and it is possible for stocks to snap back just as quickly as they sold off.  And if the price action this week is any indication, it appears the equity market will follow the price of crude oil in the very near term.

For swing traders like myself, it is a time for patience as the current tale of momentum and inertia plays out.