Reversal, Part II
Wow! Another
reversal day and this time to the upside. Just like Jan. 9’s reversal
led to downside…Wednesday’s is leading to upside. How much? Don’t know — just
like I didn’t know to the downside. What I do know is that the NEW HIGH LIST has
expanded in short order and a bunch of stocks have broken out only a couple of
days after a big drop. This shows great relative strength for those names.
You must now pay close attention to
the NEW HIGH LIST because that’s where leadership has to show up. I really don’t
care if this rally aborts as long as the market does not crumble. A trading
range will be fine as long as we continue to find valid breakouts. Continue to
overweight the strongest sectors liken RESTAURANTS,
HOMEBUILDERS, DEFENSE, misc. RETAIL, and
DEFENSIVE.
Do not buy extended. Do not get
crazy…but my #1 indicator for action is how many stocks are breaking out. I
hope this continues.
Sentiment is still worrisome…which
preceded the latest drop. Bullish sentiment, more than likely, will put a cap on
this rally. But play it day to day and remember…stock price performance first,
everything else…second.
Use the support levels I have
previously mentioned. Even though they were breached, it happened for only one
day and quickly reversed. Last point is that there are only a handful of
big-caps moving out…like Kraft Foods
(
KFT |
Quote |
Chart |
News |
PowerRating) and
Procter & Gamble
(
PG |
Quote |
Chart |
News |
PowerRating).Â
The best moves are definitely
being reserved for small to mid-cap names. This in itself could mask major index
weakness while these leading stocks continue to move.