Discretion Is Crucial
The action
since our follow-through has been less than impressive. Many of the
emails I have received, as well as my opinion, cast doubt over the current
rally. In an interview yesterday, I came across a fact that following the
stagnant 1994 market that went virtually nowhere, there was rampant pessimism
running through the sentiment indicators such as bullish/bearish advisors, etc.
Nowadays it is just the opposite, most investors are bullish; from analysts to
investment advisors. Nonetheless, we must look at it and react to what we see,
rather than our own thoughts and opinions. The market will always take care of
the rest. The major indices saw a slight rally today, but volume was again
lighter than the previous day.
Right about now, and by that I mean
Friday, it would be great to see further follow through on the market’s rally.
I would love to see another solid gain on heavy volume. On the other hand, until
we get solid evidence of distribution, we must move forward with a bias towards
buying stocks that offer a high probability of success through their fundamental
and technical structure.
Similar to the hesitant market, there
are also very few leading companies that are screaming “BUY!”
Although the market is in rally mode, we are being forced to the sidelines due
to a lack of solid candidates.
I hesitate to sound repetitive, but
the market just isn’t offering much to chat about, other than maintaining a
heavy cash position and one’s sanity. Autozone
(
AZO |
Quote |
Chart |
News |
PowerRating) continues to set up, but the distribution days in the base this week
are worth noting.
Too Inc.
(
TOO |
Quote |
Chart |
News |
PowerRating)
broke out yesterday and followed through with a meager gain of 49 cents today.
It is still nice to see a breakout working when there is one.
For the time being, all is quiet on
the front. If more stocks set up in sound bases over the next couple of weeks,
it will be important for us to use a high level of discretion in our analysis
before taking action. This market is not one that will forgive too many errors
on our part.
Have a great weekend, and don’t
forget to spend some quality time looking for anything that may become a winner
if this rally succeeds. Also feel free to check out my website on Monday
mornings for a brief summary of my weekend research under, “Market Edge.”