This Is More Like It!
Now this is more like it! The market officially posted a
follow-through day for the rally that began on 10/10. This means that the
market is probably going to support breakouts and increase our chances of
success.
Before we rush headfirst to buy stocks, there are a
couple of things I would like to point out. First of all, the market made a
massive rally such as the one we have seen very recently, only to take out its
lows. Of course, I am referring to the two-week stint we saw in August. After the recent run-up, the
S&P 500 and Dow are both running right up against
their 50-day moving averages, which could provide at least temporary
resistance and a short-term pullback.Â
This rally may very well succeed as we
have seen the necessary evidence that Bull markets usually begin. I looked back at market bottoms, and this one could be
very similar to 1982 and could offer insight to people willing to look at the
action during that period. The reason I am bringing this information out in
the open is not to cause fear, but encourage everyone to use strict rules and
maintain the discipline to apply them.
I have spotted stocks setting up here and there, but no
massive burst of options. Many names have already traded through their pivot
points ahead of the follow-through day. Anthem
(
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PowerRating) and Coventry Health
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are two recent successful examples to keep an eye on.
The medical sector is probably one of the leading areas
to follow if this rally is for real. Mid Atlantic
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pivot on 10/10 and is facing a bit of distribution today, following its 4-day
advance.
J2 Global
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PowerRating) made a massive move out of its base in
conjunction with the current rally. It is too far off its base to consider a
purchase, but can offer insight to the health of growth stocks.
Auto part makers,
AutoZone
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PowerRating) and Advanced Auto Parts
(
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PowerRating) are breaking out.
As we go through
these breakouts, there is a lingering question: If we wait for the confirmation to buy anything, won’t we miss out
on all of these? If this rally is for real, then there will be plenty of
opportunities in the days and weeks ahead as many more stocks will appear. This market still has a lot of work to do before I would recommend getting
entrenched in the few stocks that are breaking out. The top ten industry
groups today all come from the bottom of all groups. The highest one I see is
#114 out of 197. The name of the game is to take our shots when the greatest
odds are in our corner. As I spot solid setups and see how this rally
unfolds, I will share opportunities with you as they arise.
Until Thursday,