Point, Counterpoint
I have always
learned that one distribution day does not change the trend of the
market. But yesterday was a doozie. The big question is whether this
aborts the rally. After all, a lot of the drop occurred on more news of anthrax
attacks. It’s time to play point and counterpoint.
On the positive side:
- Distribution happened right where
it should have — around the March/April resistance area.
-
The market has been
acting almost perfectly on a daily basis since the latest low. Pullbacks are
inevitable. Up days have been on heavy volume, down days have been on light
volume — until yesterday.
On
the negative side:
-
The symptoms of this
latest rally remind me of other bear market rallies. It’s sharp, quick and
feels good. A lot of closet bulls have also started to come out of the
woodwork too quickly for my tastes. -
Breakouts continue to
fail en masse. Just take a look what happened to
(
ADVP |
Quote |
Chart |
News |
PowerRating) after a
beautiful-looking breakout.
The New High List continues to be void of any kind
of leadership. A strong sign of a new bull market is stocks breaking out into
new high ranges.
The biggest moves have been reserved for stocks that were hit the hardest. A
stock that drops 90% and then rallies 100%, is still down 80% from the highs. I
figured that out all by myself.
The rumblings of this latest move that “This is the bottom” are just
too loud.
So, what do I do? Exactly what I have been doing — playing it close to the
vest. Too many investors are popping the corks too quickly. It is OK to be a little
late to the party if this is a new bull…but it is not OK to be early. If the
bear starts to bite again, severe pain will be inflicted. I am now going to pay
close attention to the pullback for volume clues as well as support — definable
support, not one-day support. I am also going to be looking for how many
stocks actually break down as the markets pull back
as well as leadership showing up.