Endurance Test
I sincerely hope
everyone had a terrific holiday. Now it is
back to business.Â
One could consider Friday the first day of an attempted
rally. I urge you to give it little weight. A deep oversold condition after a severe trouncing
combined with a holiday-shortened, light-volume trading day usually leads to decent
gains.Â
Just remember the more than 5% gain of November
14. Vicious selling ensued two days later.
The intermediate-term trader should wait for strict confirmation before wading into shark-infested
waters. If you get another strong gain on higher volume in the next few days,
stay skeptical. As a technician, I am constantly looking at a photo album for familiar
faces. The familiar face I want to see is one of a growth stock coming out of a tight consolidation and breaking out
on heavy volume.
In a good market,
subsequently more and more stocks follow. The fact is most glamour name growth stocks are not even close to resembling what
a good chart looks like. Most are way below their respective 50- and 200-day moving
averages. It is also gives me pause when I see 659 stocks at new yearly lows like I did on
Thursday.
Stay
patient! You may be hearing that many times from me in the near
future. I want to make sure I drill it into your heads. Vicious bear markets like this
will test your patience and discipline. I know because I go through it every
day. Not pulling the trigger has been my best friend over the last couple of
months. Remember, eight out of 10 stocks will go down during times like this,
not the greatest of odds.
As I write this, the state of Florida has declared George Bush the winner of its
25 electoral votes, putting him over the top. Because of this, futures are higher which should lead to a stronger Monday
opening.Â
Careful! Everyone in the world expects a big rally off of this news.
Since when has the market accommodated everyone? Bounces will be just that…bounces.
   Â
The same few sectors are showing strength. They include Beverages — Alcoholic
(in this market, I can see why!); Homebuilding, Hospitals, Restaurants and
Retail — Drug Stores and Supermarkets. I am sure I really excited you with those sectors.
Hang
in there!