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A Market In Motion Tends To Stay In Motion...

Newton's First Law of Motion states that a body at rest will remain at rest unless an outside force acts on it, and a body in motion at a constant velocity will remain in motion in a straight line unless acted upon by an outside force. Financial markets are not immune to Newton's First Law. The short-term "motion" in stocks is to the downside.

As of 12:45 p.m. ET, today's stock market gains are a positive, but not all that meaningful yet. Volume is running significantly behind yesterday's sell-off, indicative of a higher desire to sell yesterday than the desire to buy today, something that could improve before the session closes.

The advance/decline stats on the NASDAQ are running about even, and they are slightly bullish on the NYSE. The advancing and declining volume stats look much better, showing the larger market players do have some interest today. In terms of investing new cash, or redeploying cash in existing accounts, we will continue to be patient. We first presented the table below using data from March 7, 2010.

Patience is a Virtue

The basic concepts in the table above can be summed up as follows:

In the short-run, until the market can prove otherwise, we will continue to give the bears the benefit of the doubt since they have control of the very short-term trends. Big-picture-wise and longer-term, we will give the bulls and the bull market the benefit of the doubt, until proven otherwise, since they control the long-and-intermediate-term trends.

We mentioned early on Friday the technical concerns we have are starting to spill over into weekly charts, which increases the need to be skeptical and patient until the market is acted on by positive outside forces. The action in defensive investments, mentioned on March 10, has not changed significantly yet.

For now, the bull market remains firmly intact (see oil/bear post), but we have to respect how far corrections can run, especially in an environment where Fed policy (printing money) is such an important component of the market's recent strength.

 

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