Choppy periods

Let us look at a broader picture to place current move in overall longer term perspective.

Market bottomed in 2009 and since then has been in an uptrend with occasional corrections. The last major correction of around 16% was between April to October 2011. The current move is part of that bottom.

Since October 2011 bottom the dips in markets have been of 8% kinds. The breadth has steadily dropped as market has moved higher. For every dip of 5 to 8% the Fed has been very aggressive in talking up the market or announcing new policy response. As they say don't fight the Fed has been true since 2009 bottom.

Bulk of the 2012 year was spent by market in a choppy up move. Only the first few months has clear trend. This year also we are probably looking at similar move as of now. The market is becoming choppier in last few weeks.

However the market reached extreme breadth readings few weeks ago, along with that sentiments readings have also been at extreme. In last few weeks breadth has pulled back from extreme readings. The selling was just 2 or 3 days affair. TThe market has been holding up near high in choppy range and likely to attack new high again on at least some Indexes.

Moves on individual stocks have been compressed. As we have seen during this recent bull moves the number of stocks up 25% in a month has been very low compared to historical figures for rallies. Stocks are breaking out , making small moves and pulling back or going sideways.

That is the backdrop of the market. We have to adjust our profit expectancy accordingly..