My First Priority Now
It sure was
nice to see green, especially a lot of it. Unfortunately, one day
cannot tell us a whole lot about which way the trend is headed over the next few
days or weeks.
In a major publication, I read one analyst being quoted as saying that yesterday marked the beginning of a new
rally because of the power behind the move, in terms of massive price and volume
increase. WRONG! If this rally is going to
amount to something, the soonest way we’ll see the evidence is Monday. We will
be looking to see if the major averages are able to post a 2% increase on
heavier volume than the previous day. This also has to occur before
the market violates any of the lows it set on 7/24.
After watching yesterday’s move, I
am reminded of a simple fact about Bear Markets. Everyone knows that they are a
time when the market drops and almost everyone that owns stocks loses money. Not
everyone knows that the biggest point and percentage increases also come during Bear
markets, not Bull Markets. This simple fact makes
shorting stocks very difficult.
At this stage in the game, the first
priority is to watch the market. The second piece of research we should focus on
is to seek out leading industry groups. If
the market confirms the latest rally, then we will want to know where to find
leading stocks to latch onto.
Two of the groups that come from the
top quartile and stood out on Wednesday were HMOs and Hospitals.
Many
of the stocks in these groups have more base-building to do, but that can happen
very quickly. United Healthcare
(
UNH |
Quote |
Chart |
News |
PowerRating) is
just an example of a company that needs more time to smooth out and complete a
quality base.
United
Surgical Partners
(
USPI |
Quote |
Chart |
News |
PowerRating) is a quality company from the hospital
group. It is another example of a base that has more work to do.
I am not saying these will be great
groups to gravitate towards when the market does come around, but they are some
of the best groups out there right now.
In the meanwhile, cash continues to be
a preferable safe-haven until the market inevitably begins another Bull Leg
higher.
Have a great weekend,