To Turn Things Around, Two Primary Things Must Happen

There
has been no secret behind the direction
of this market over
the last month: it has been going down and taking growth stocks with it.

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Up until about the last
week of January, the market was chugging along with the Nasdaq firmly in the
lead. On 1/27, we caught our first blatant distribution day, or solid evidence
of professional selling. This pattern has continued and has put most growth
stocks in a poor position to rally. Yahoo!

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for example, took another move even lower beneath its 50-day moving
average today.

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Netflix

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also made such a move on massive volume as the company
forecasted a larger-than-expected first-quarter loss.

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^next^

It would be great to see
the market and growth stocks regain their footing, but there is a long way to
go to do so. We’re not as bad off as a Bear Market, but I am not impressed
at all with the action of stocks and the major averages.

In order to turn things
around, two primary things need to happen:

1. We need to start seeing
accumulation in the overall indexes. They need to rally on above-average volume
in a meaningful way.

2. Growth stocks need to
take the reins from the cyclical giants that have been acting the best. Stocks
like Wal-Mart
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and indices
like the Dow are not your historical leaders for a prolonged Bull Run. It is
usually better to just get out and patiently await something better.

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Qualcomm

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pre-announced good numbers and saw a nice move, which it has held.
This isn’t exactly the stock I would be looking for to talk about, but
it is better than most of the other options right now.

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With most stocks being taken
apart in the growth arena, it is best to avoid new purchases and keep very tight
stops to control any downside in a portfolio. Patience for an easier market
may be the best recipe until we start seeing some positive factors positively
influence the market.

Tim Truebenbach

timt@tradingmarkets.com