Outside #3

Today was another very nasty reversal. Specifically, it was a large-range outside day (LROD), given that the market rallied to new highs early and then reversed lower to close below yesterday's lows. Thus, when you look at the daily chart of the indexes, you see the "outside" day with a higher high and lower low on the same day.

About the only silver lining was the fact that volume ran below yesterday's levels, so we avoided another distribution day. But breadth was simply awful, with more than -2000 net decliners on the NYSE. Can't remember the last time I saw breadth that negative.

The last 2 times we have seen negative LRODs (on 3/21 and 3/28), there was no follow through, and the market proceeded to go on to make new highs. But I think a third LROD over a 3 week period may finally mean something more significant.

Of course, forecasting short-term pullbacks has not been a profitable strategy this year. That said, I do think we remain overdue for a correction. Because sentiment is not overly bullish, I do not expect the pullback to be that severe. Maybe it will coincide with earnings season. Regardless, I think it will be the sort of pullback that offers a better buying opportunity.

Check in over the weekend for a look at the sentiment indicators--