Three Stocks I’m Watching Now (Part 2)

The
market has not given any clear clues over the past couple of days
whether it may stay at these slightly higher prices for a while longer or
not. 

 

 

 

We know the market has
rallied on below-average volume.  In fact, the follow-through day came on
lighter-than-average volume.  The NASDAQ, which usually leads the way, saw a
distribution day on 8/24, but this also came on below-average volume.  I
believe the only significant evidence we have seen, follow-through day
included, goes back to late-July early-August when the market was plagued with
above-average volume and selling.  There has yet to be sufficient buying
(above-average volume rallies) to counter that selling we saw.

Whenever I see a rally, I
start to look into the quality of it or volume levels that I just spoke of as
my first indicator.  Secondly, I will start to tear apart the market’s
leadership.  Right now it has very little.  We have seen a couple of breakouts
so far, but nothing in any quantity and nothing near a 20% gainer or true
leader. 

Pulte Homes (PHM),
Accredited Lenders (LEND) and Commercial Capital (CCBI) are three
of the few names that stand out.  LEND has yet to break out but continues to
set up.

 

 

The best thing to do right
now is keep a close on the volume in the major indexes and scour the market
for potential leadership.  These two traits need to exist in order for a
long-term rally to unfold.  Until they do, staying close to the sidelines is a
smart way to manage money.