Now We Wait
The market has been
very choppy for the past ten weeks. Last Wednesday, following the
Fed’s most recent rate cut of 1/4 of a point or .25%, the market moved higher
and showed large volume. This was an early indication that institutions are
moving in and possibly buying stocks. Unfortunately, one rally day in the market
does not lead us to a bull market. The next step we are waiting for is a
confirmation in terms of further large-scale buying by institutions four to
seven days after the first rally day. Once this appears, we will look to start
taking positions in leading companies.
Unfortunately, as I write this at 2:00 pm ET, I
have noticed the ugly head of distribution working its way into this latest
rally attempt. For example on the Nasdaq, we were looking at about 720 million
shares trading hands around this time yesterday vs. 1 billion+ at the same today
and we are down on the day 1.8%…Not Good! The
S&P 500 is in the same situation while 500 million shares changed hands at
this time yesterday, today we are looking at over 600 million and the index is
down 1.1%.
Unfortunately, when even one single day of
distribution pops up while the market is awaiting a rally confirmation, the
rally will usually face steep obstacles and may very well have its lows
undercut, thus killing the rally. For our reference, the lows of the rally are
1817 on the Naz, and 1153 on the S&P 500.
Aside from the market analysis, this past
weekend I sorted through my database of 10,000+ stocks and was able to sort them
all down to four viable candidates for potential investment, should the market
move higher. If the market does confirm the latest rally attempt, the upcoming
weeks and months will produce many more potential companies to buy. In the
meanwhile, while the great stocks are far and few between, money market even at
3.7% sounds pretty good!
The medical sector was the main producer of
stocks in my weekend research. Diagnostic Products
(
DP |
Quote |
Chart |
News |
PowerRating) was the first name I
found and is working on the handle of a 12-week base.
Resmed
(
RMD |
Quote |
Chart |
News |
PowerRating) broke out yesterday, but is
struggling to hold above its pivot of 59.09 today.
Lifepoint Hospitals
(
LPNT |
Quote |
Chart |
News |
PowerRating) is
forming a nice, downward sloping handle on its 34-week base.
Province Healthcare
(
PRHC |
Quote |
Chart |
News |
PowerRating) is
working up the right side of its base.
The last stock I found setting up in this
difficult environment is Frontier Oil
(
FTO |
Quote |
Chart |
News |
PowerRating).
Despite the fact that there are a few stocks
setting up, the market will be the deciding factor on their success. From time
to time, I will purchase a small position in a stock when the market is about to
confirm a rally if the stock is breaking out ahead of time. Americredit
(
ACF |
Quote |
Chart |
News |
PowerRating)
was an example in April. But on the other hand, if the market starts to fold, as
we are currently seeing, owning anything will most likely result in losses
unless any purchases are played very tight and sold on any indication of
weakness.
Be careful and wait for the market to provide
us with a good investment opportunity.
Until Thursday,
Â