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The recent consolidation in the market has been argued as a sure sign of a topping process by many, or alternatively as merely a pause before the next leg higher. To be sure, the recent strength in the Dollar, as well as the vast array of inverted hammers and hanging man candlesticks printed, are colorable arguments for the top-callers to make. At the same time, the S&P 500 is still operating comfortably above the rising 20 day moving average, even after seeing some profit-taking over the past several days.
Perhaps what is most damaging to the bear case is the price action in the leading names. $AAPL, $AMZN, $FCX, and $GS are leading stocks who have digested their recent massive gains handsomely. Moreover, other stocks with sound bases are showing a propensity to follow-through with a breakout higher.
The bottom line is simple: The reason why I remain bullish is because I am erring on the side of the prevailing trend. However, I am keenly aware of the possibility that we may be seeing institutions starting to dump their shares to retail traders. Both of the bullish and bearish arguments have merit here, which is a good reason for the choppy, overall neutral action.
