The Best Way To Play This Market
The market seems to be having a
dilemma right now and the best way to play it is to follow some
simple rules. We’ve been in rally mode short and furious since last Thursday’s
reversal in the major indices.
 
 
This rally has not impressed me up to this point because
it has so many bear market traits, but mainly two: lots of points on the
indices but very little volume. It is crying out: “Quick, get in or you’ll
miss out.†It’s important to follow the big guys when it comes to times like
these. By the “Big Guys,” I am referring to institutional dollars that control
stocks. If we see a confirmation of this rally between Wednesday and next
Monday, I will be more convinced that it will be alright to seek out new
purchases. This confirmation would come if one of the indices rallied at least
2% on heavier volume than the previous day.
I am not saying this cannot happen. With Iraq and North
Korean issues still unresolved, there is plenty of doubt against any
rally. Bull Markets are built on this foundation of doubt…it helps fuel their
ascent. I am just saying that the recent action in the market we have seen,
makes it appear unlikely.Â
The rally has led a few people into the growth arena
already. Ebay
(
EBAY |
Quote |
Chart |
News |
PowerRating) is trying to
push ahead, but volume has not fallen in line.Â
 
Â
For the common result to this tale, consult
a chart of Hotels.com
(
ROOM |
Quote |
Chart |
News |
PowerRating). ROOM
tried to break out on 11/15, but volume never appeared. It enjoyed a few gains
until taking it on the chin. Many of these names will do the same if the
market doesn’t experience solid accumulation.
At this time, it is best to watch the market and follow
its lead. There is no point in taking unnecessary risks with our capital this
far into a bear market. When a new Bull is ready to spring up, it will reveal
itself through price and volume and many individual stock opportunities will
follow.