Is It Time To Sell Into the Rally?
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Jonathan Yates
Is It Time To Sell Into the Rally?

After its worst week for 2013, the Standard & Poor’s 500 Index (NYSE: SPY) has rallied well over 2.0%.  Technical indicators are pointing to the rally lasting for the rest of the week to challenge the upper 20-day Bollinger band at 1594.  That was the peak level from two weeks ago before the tumble.  This could be setting up for another pullback, which might be an appealing time to sell.

There are certainly many Apple shareholders who wish they had!

It used to be that Apple (NASDAQ: AAPL) was pulling much of the market up by itself.  While Apple was up today as it beat Wall Street’s estimates for earnings, profits were still down.  Much of the jump today, almost $7.50, can be attributed to Apple doling out more cash to its shareholders.  As was detailed in a previous article on this site, the main appeal of Apple is rapidly becoming its role as an income stock.

As Apple is down almost 40% for the last six months of market action, its above average yield of 2.61% is very tempting in itself.  Making this income component even more appealing is Apple’s announcement today that it will distribute $100 billion to its shareholders in a stock buyback and dividend hike.  The chart below for Apple clearly shows that something was needed to pull the stock out of its collapse since the introduction of the iPhone 5 last September.

What next for the market?

As the chart below shows, volatility is still the order of the day…or this earnings season, which has been weak.  That is to be expected with the United States still struggling out of The Great Recession, growth down in China, Europe in a depression, and Japan is the 22nd, 23rd, or 24th year of The Lost Decade…but who is counting?

What should be tallied, though, is the very bullish indicators from today’s market action.  The three major indices all rallied from 2:30 pm to closing, with the candlestick patterns being bullish.  More than three times as many stocks advanced as declined.  Almost nine times as many hit new highs as opposed to new lows.  A significant number ended the day above the 50-day and 200-day simple moving averages.  As for the market sentiment moving into tomorrow’s trading, it is bullish by 59% to 21%.


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