These 3 Charts Tell The Story

 

I think there is a
chance things have changed…and for the better. I say this for several
reasons:

 

Breakouts are FINALLY
starting to work.

 

The market has
completely ignored blow-ups in important names like FNM and MRK.

 

The NEW HIGH LIST has
expanded nicely this week while the market has lagged.

 

Most importantly, the
amount of set-ups I am seeing is expanding. If there is anything I need to
see it is more and more stocks setting up to break out of range…and that
is exactly what is going on right now.

 

I believe there is a
good chance for decent upside here…maybe not as much in the indices but in
the average stock. There is not much you can do about a MRK which was down
the equivalent of DOW 88 points on Thursday. Do not be fooled by the weaker
DOW and S&P this week. They have been held back by many big-cap names. 

 

Your job is to gauge
the breakouts I am seeing. If more and more occur…and succeed, that will
be everything you need to know about the market.

 

Conclusion: for the
first time in a while, I believe the “market” has a real chance to move
higher…and yes, if the market moves higher, the SEMIS will go along for
the ride.  This has nothing to do with my opinion of the economy or anything
else. This has only to do with the technical characteristics in the market I
am seeing.

 

After I put this report out, I received several emails telling me I was
nuts. One email asked me if my thoughts come out of thin air. No…they
don’t! Before I get into Friday’s action, here is what I
do…physically…to figure things out.

 

I scan 2000 stocks and 197 groups…usually 3-5 days/week. It only takes me
about 2 hours…and I am able to scan during my 2 hour radio show. I then
make lists. One list is of breakouts…another for set-ups to break out. I
then make a list of breakdowns…and another for set-ups for breakdowns. I
can easily gauge the markets by how many names are on each list. When a ton
of names set up to break out, almost always means the market is ready to
move higher. That is exactly what happened this past week. When I saw a
bunch of names setting up on Wednesday and Thursday, it was just a matter of
time. In this case, the next day.

 

Friday’s action only confirmed my thoughts. Let’s take a look at some
important pictures.

 

The TRANSPORTS break out to a new high. Considering $50 OIL, this is
amazing.

 

The S&P SMALL CAP 600 breaks out of a 6 month base.

 

The NASDAQ powers through near-term resistance on strong volume.

 

The NEW HIGH LIST has expanded markedly over the past few days.

 

More and more breakouts are occurring.

 

The market has a good chance to continue this move higher. In fact, the S&P
500 now has a chance to break this year’s highs. I would normally say that
for the DOW, but with the recent action in MRK and others, it will be
tougher. Remember, the DOW is only 30 stocks.

 

Am I longer-term bullish?  NO! I am bullish right now….and probably for
the coming weeks. I can’t go any further than that. I am still only finding
about 55% of all stocks in good technical shape…though improving. This
number would have to improve by a wide margin before I could really get
excited.
Shorter-term,
I wouldn’t bet against some sort of pullback to work off some of the recent
move but with all the breakouts, pullbacks look to be buyable.