Only about 51% of U.S. stocks above $2 a share that have been trading for at least six months are above their 200-day moving averages, and just under 34% are above their 50-day MA.
The Dow fell over 700 points to start the new year, and all of this info adds to my theory that the first half of this year could be rough for the market.
I mentioned this yesterday when the market looked bullish before the open, and we ended up having a pretty big down day.
When we open high and close way down, that’s not a good sign, and I expect we’ll see more of the same today.
There’s no major catalyst and institutional activity likely won’t pick up till later next week, so there’s likely to be more chop and more downside ahead.
So while stocks are up premarket, we need to be careful!
Something to consider right now is the correlation between the long bond (TLT) and U.S. stock market is the highest it’s ever been at 0.72%. The average stock has a 0.66% correlation with its cousin stocks.
This is why we should be paying close attention to the bond market (TLT). If you see bonds up, stocks are up. When bonds cool off, the rally disappears.
Look at it this way…
The international currency market is 1,000 times bigger than the bond market, and the bond market is 1,000 times bigger than the U.S. stock market.
I’ll cover all that, my daily hitlist of longs and shorts and more in this morning’s “Premarket Must Watch” video!
Roger Scott
Roger Scott Trading
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