ETFs Grind Higher On Low Volume In The Markets

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March 12, 2010 11:20am NYSE:EWW NYSE:IWM

Markets continue to grind higher since our “buy” signal in late February and our Exchange Traded Funds continue logging steady gains.  Volume remains low and today we closed right at the yearly

 high which marks significant resistance. A break through here would establish 1150 on the S&P as new support. 

The advance decline line continues to steadily rise, as do all of our indicators, however, with 70% of all stocks on “buy” signals, the market clearly is overbought and remains at risk of possibly a major correction. 

Volume has been light throughout this climb that has seen the S&P rising nearly everyday.  The VIX is down into the teens, well below its historical average of the 20s, and leadership has been seen in financials, emerging markets and small caps. Particularly strong have been the Russell 2000 ETF (IWM) and the iShares Financials (IYF)

Cash on hand at mutual funds has reached a low of approximately 3% and retail investor sentiment is bullish and now at levels that oftentimes precedes market corrections.  Beyond that, financial advisors are notably bullish and these two sentiment indicators are often good contrarian indicators as everyone who wants to buy has probably already bought.  

However, none of this matters as long as the market continues to climb and demand is the driving force of the market place.

Our current Exchange Traded Fund positions include the Russell 2000 index (IWM) Consumer Discretionary (XLY) Industrials (XLI) and Mexico (EWW) and Homebuilders (XHB)

We will stick with our positions, follow our indicators and move to the sidelines and then inverse positions when conditions dictate.  We are at a key moment and will soon find out if this will be a successful challenge of the resistance level of 1150 on the S&P.  If this challenge fails, a reversal is likely.  Potential support levels are 1120 and the 50 Day Moving Average of 1111 and most likely would represent new buying opportunities if the decline is contained at those levels.

-Written By John Nyaradi Publisher Of  Wall Street Sector Selector

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