Distribution, distribution...

The second distribution day to hit the NDX in a week occurred today. Now the bulls would say, correctly, that Tuesday was a modest distribution and that the market was mixed with a small gain for the Dow and small losses for the other major indices. But distribution it was all the same. This following a strong market on Monday on lower volume. The armor in the bulls case is that the market is still in an uptrend and that the NDX actually recovered from larger losses, earlier in the day to trim the damage. This action suggests that the bulls have not given up yet and that another attempt to push convincingly through resistance around 1564 on the NDX should be expected. So look for a breakout to new highs for the move, but use any such move to lighten up. Those who are aggressive should wait for a breakout failure to go short using 1564 as a trigger for initiating shorts after a failed breakout attempt. Volatility remains historically low suggesting that an increase is inevitable. Patience and diligence are the keys here, because if a top is being put in place it will likely take a while to develop.

The bond market is giving much clearer signals, thankfully. Since these signals point to higher rates directly ahead, I am glad that I sold my bond position in October. Look for the ten-year to break above 4.25% in yield and head toward 4.90%, most likely in January. The next resistance level after that is 5.5%, a key level that would indicate an end to the multi-decade bond bull market. I am not so sure that such a level would be breached and at the present would lean toward repurchasing bonds with yields above 5.0%. But that can be dealt with when the time comes, until then stay short in duration and wait for better yields which are surely coming, almost surely in December with another quarter point bump likely from our good friend Al.