If They Stay This Way…
The rally I
have been waiting for has arrived! Once again, all of the noise and
negativity made it near-impossible to predict if you were listening,
which I would not recommend doing. There is no substitute for watching price-and-volume
action and making decisions based on these two traits. The major averages have
been pulling back on lighter trade for the past week following the initial
rally’s massive move…exactly what
we want to see.
Despite the fact that the Dow was down hundreds of points since last Monday, it
doesn’t matter when put in perspective with the rally it had. At yesterday’s
low, the Dow
(
$DJX |
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PowerRating) was still 500
points off the lows set on July 24, giving it plenty of room to get another
breath for another move higher. The S&P 500
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$SPX |
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PowerRating) was no different.
Today, we are seeing the market make
another push higher and volume is coming in
heavier than yesterday. If
we close at these levels, we have ourselves another follow-through
day.
“How can we make money right now
?” is the question that I imagine is on everyone’s mind. Of course I am
going to say the Trading
Service answers that question the best, but there have only been two
suggestions over the past week and one was too speculative, even for me. One
idea was in one of the few stocks that had set up and only allowed for a short,
two-day trade that produced meager profits for us. The second (which was, as I
stated in the service, very, very aggressive) was to buy into the market through
last week’s and yesterday’s pullback.
In the upcoming days and weeks, if the
market is able to act as well as it has over the last week, I believe leadership
will present itself. Each day the “M” in our strategy holds strong,
allowing more money to flow into stocks that are building bases. As this
continues, we will inevitably start to see stocks that are ready to break out of
these newly formed bases and push higher. Watching and interpreting the daily
action of the market is more important and impacting on individual stocks, than
ever.
Stocks such as
Coinstar
(
CSTR |
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PowerRating) will be able work through and complete its base,
if the market remains under accumulation.
The next step will be to monitor
leading groups. Many of the regional banks have been holding their own, but most
are very thin stocks that are near-impossible to trade. As I was looking through
my industries, I noticed that small-cap stocks dominated the list. Many Consumer
and Defense names fell under this category. I would not recommend buying the
thin names, but I would keep an eye on the group for other names to emerge. Many
big leaders emerge as small and mid-cap names but gain strong institutional
sponsorship as they round out their bases.
In upcoming columns, I will share some
of my research as it becomes available and as I see leaders emerge. For now, it
will be most important to monitor the overall health of the market as seen
through the price-and-volume action of the indices. They look great so far and
if they stay this way, it won’t take too long for some profitable
opportunities to emerge.
Until Thursday,