A Tough Battle
The major
averages are having a tough time through most of Tuesday’s trading.
They are all down at least 1% on heavier trade than yesterday with only two
hours remaining in the trading day as I write this. A random day or two of
distribution doesn’t amount to much, but any more than that can spell trouble.
August 13 was the last day of
distribution, and we have moved up nicely since then. I would not read too much
into it if today does, in fact, turn out to be a distribution day, where one or
more of the major indices fall on heavier volume than the previous day. It would
be extremely positive if the market could
rally back positive and avoid the distribution, or rally and close well off the
lows of the day.
The bigger concern is how leading
stocks are acting. Thus far, they have been breaking out very nicely, but their
follow-up moves have left a lot to be desired. Dentsply
(
XRAY |
Quote |
Chart |
News |
PowerRating) has shown a nice stair-step push following its 8/8 breakout, but it
is still only up 7-½% from its pivot of $40.
Apollo
Group
(
APOL |
Quote |
Chart |
News |
PowerRating) is another successful breakout, but it only stands
about 3% above its buy point of 39.70.
The fact that these stocks have not blasted off a full 20% isn’t necessarily
bad, it just doesn’t let us read into how well growth is working quite yet. It
is important to monitor these and other breakouts, such as Coinstar
(
CSTR |
Quote |
Chart |
News |
PowerRating) (which is setting up another handle), Coventry
Health
(
CVH |
Quote |
Chart |
News |
PowerRating), Doral Financial
(DORL) and Isle of Capri Casinos
(
ISLE |
Quote |
Chart |
News |
PowerRating)
(which is setting up a handle towards the top of its double-bottom base).
Other stocks continue to break through
pivot points each day. Today’s name is Moody’s
Corporation
(
MCO |
Quote |
Chart |
News |
PowerRating). We’re all familiar with this company and
their credit ratings…I know Worldcom
(
WCOM |
Quote |
Chart |
News |
PowerRating)
is.
The landscape looks pretty solid right
now, but definitely has some proof to exhibit before we should jump into things
too heavily. The market has acted well up until today, but as I said before: One
distribution day probably isn’t enough to topple a rally. It will be important
to see how that market acts moving forward, and we will revisit this again on
Thursday. We also need to monitor breakouts to see that moves higher are
accompanied by heavier volume, and pullbacks coincide with lighter volume.
If you’re having trouble with any of the recent action, feel free to email
me with your questions or even better, consider a month with my trading
service. The service is actually posting real buys and showing exactly how I
am managing these positions on a daily basis! In any case, if the market pulls
back, then it will be important to preserve capital if growth stocks fold. If
the market roars higher, and growth stocks lead the charge, we will want to
capitalize on it as much as possible.
Good Trading to you,