These 7 factors could drive the markets in the coming weeks

Neutral

New Highs vs. New Lows - This number has been deteriorating in recent weeks. While new lows have not yet gained great strength, they normally don’t at tops. It takes a while for the negative breadth numbers to increase significantly. New highs have dropped off but are still outpacing the lows. This mildly concerning at this point, but bears watching.

Sentiment - We don’t seem to be at a notable extreme here so I am deeming sentiment a non-factor until readings move a bit more.

Accumulation/Distribution - There has been a bit more distribution than accumulation in the market, but nothing overwhelming.

UUWNHI* - What’s working and what isn’t? The market has been tricky. There hasn’t been strong, sustained follow through in either direction, which is typical of a market without a strong trend. Unfortunately this means that nothing as been working well for more than a few days at a time. Some of the best opportunities I’ve seen have been in playing overbought/oversold conditions in indices and ETF’s – some of which I’ve pointed out in recent columns. So what does this tell us about the health of the market? Right now, not much.
*Unofficial Unscientific Working/Not Working Hanna Indicator

Negatives

My shrinking watch list - What this means is that I am seeing more basing formations fall apart than I am seeing basing formations form. This is not good. Less bases means less leadership and less opportunity to profit should the market move higher.


Wildcard

The full economic impact of Katrina, the potential oil supply problems and rising gas and oil prices is not yet known. While the US economy is incredibly resilient, it has been nearly 2 ½ years now since we’ve seen a true market correction. That is a long time. Could this potentially lead to one? Only time will tell. Stay posted.

Best of luck with your trading,
Rob

robhanna@comcast.net