In the coming days, focus on these stocks
With the end of the month close at hand, here is
a breakdown of what I am seeing…
Positive
UUWNHI (Unofficial, Unscientific, Working / Not working Hanna Indicator):
Breakouts have been lukewarm lately. I’m seeing some success, but still not the
kind that was evident during the January rally. The market remains choppy.
Trends have had little persistency. Therefore, buying pullbacks has been an
easier play. On the short side, I have seen very little in the way of
breakdowns. While the market has drifted the long side has been more favorable,
but not tremendously.
Neutral
Foreign Markets: Most foreign markets have begun to consolidate. I am seeing
very little in the way of leadership and new highs abroad. An exception is
Malaysia. Markets like Canada, Japan, China, and Singapore are attempting to
break out and start a new leg up. Should they succeed that would be a positive.
My Stagnant Watch List: A growing watch list means additional potential fuel for
any market rally. A shrinking one indicates more bases are falling apart than
setting up and is a market negative. Lately I would classify my watch list as
stagnant. Since the market has been inching upwards, this is not a good sign.
Still, more neutral than outright negative.
Accumulation / Distribution: Price and volume action has been spotty. There have
been minor bouts of both accumulation and distribution evident. (i.e. Wednesday
was an accumulation day. Tuesday was a distribution day). Until we see more
consistent action with regards to price and volume, this indicator is of little
value.
Sentiment: Another indicator telling us very little. I am seeing neither
excessive bullishness nor excessive bearishness. Sentiment only provides a clear
edge at extremes. Therefore, neutral.
Negative
Breadth: While the market has drifted higher, it has done so with
fewer and fewer stocks in tow. As I’ve pointed out in recent columns, poor
breadth is many times a precursor to a top. Breadth will need to pick up if this
rally is going to gain any steam.
Summary
While the market has continued to plod its way higher, breadth and
momentum statistics have weakened. One positive that has occurred in that last
couple of weeks is that the Nasdaq is attempting to reassert its leadership over
the NYSE Composite. A leading Nasdaq is a bullish sign. Still, most of what I am
seeing is neutral at best. The rally appears old and tired. The environment is
not yet conducive to shorting, but continued caution on the long side is
warranted.
For those who may be looking to expand their
knowledge beyond just market timing, my
Hanna ETF Money Flow System utilizes the VIX in generating trading
signals for spread trades.
Rob Hanna is the principal of a money
management firm located in Massachusetts. He has spent the last several years
developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.