Look To These 4 Things To Gauge The Current Market

  • July 29, 2003
  • Tim Truebenbach


The recent market action has been very peculiar. We
have seen mixed signals as a few stocks push higher while other get taken
apart (see chart of
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indices posted another distribution day on Tuesday after rallying on lighter
volume last Friday. 




We have seen recent leaders
like Hi Tech Pharma
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Ebay
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Ryland
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action not very becoming of leaders. Without solid leadership coming from
growth stocks, the market doesn’t stand a chance. The poor technical action
referred to above is evidence that institutional dollars are flowing from the
market. 




The Good News is that we are
still shy of steering clear of this market due to overwhelming
distribution. There’s still a chance this could be chalked up to Summer
Doldrums and when the Big Guys return in the fall it could be a different
story.  In order to see this happen and have the market take off again, a few
things need to happen:

  1. First, the market needs to
    start rallying on heavy volume. Preferably, volume should come in heavier
    than the previous trading day and above-average. On days when the market
    rises, it needs to do so for at least solid, 1% gains. At least then we know
    mutual funds and others are involved in the buying.

     

  2. Secondly, we need to start
    seeing Bull Market traits once again in the days’ trading pattern.  The
    market needs to get rid of opening strong and finishing week and do just the
    opposite.  Let’s see some nice, negative 100-point Dow opens only to finish
    up 100!

     

  3. Thirdly, the Nasdaq needs
    to reassert its leadership role.  The index has posted one less distribution
    day than the NYSE-related indices (Dow, S&P 500, etc.) but it also needs to
    go on a Nasdaq-style run for about 5-10% on heavy volume.

     

  4. Finally, we need to see
    strong individual stocks emerge in the leadership role for a consistent
    rally.  We already covered the fallen leaders.  A stock like Ebay may be
    down, but it can still easily come back and re-assume its role because it is
    still trading above its 50-day moving average.  New, quality names also need
    to step up.  Accredited Lenders
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    has acted well up until its solid earnings report yesterday. It and stocks
    like it need to find ways to fight back above their
    50-day moving averages     and gain support
    from large dollars.  We need to scan stocks out there on down-days in the
    market and find a couple trading up a couple of bucks that haven’t gone on
    wild, Cyberonics
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    but still have fresh legs.


This market is definitely
down from the strength of March through June, but it is absolutely not out. If
it starts to put together a few wins here and there, we may be back in
business very quickly. 


Tim Truebenbach