Two problems with the current market

Timothy J. Truebenbach is the
President of True Capital Management and general partner of True Capital
Partners LP, a hedge fund. He uses a disciplined model that trades on the
intermediate-term time frame. For a free trial to Tim’s Nightly Stock Analysis

click here
or call
888-484-8220 ext. 1.

This market has been wonderful at throwing curve
balls into the mix to confuse and baffle investors. All one needs to do is pull
up a daily chart of any of the major indices to see a back and forth battle
between accumulation and distribution.

The S&P 500 just recently set a higher high after holding the low of 6/14…if the
market were to turn into a rally now would be as good of time as any. Two major
problems currently exist for that to happen. The first is in the fact that we
have yet to see a follow-through day in the major indexes since the prior rally
of June was dismantled with many indices undercutting prior lows and heavy
distribution. Distribution is defined as ample evidence that institutional
investors are selling shares of stock on the open market. When these guys sell,
they don’t usually just do it for a day.

Secondly, we have very few quality growth stocks emerging from first and second
stage base patterns. Without these factors, there is little leadership which the
market has normally required to advance. Names like Hansen
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have failed to hold key areas of support.

As this market makes every attempt to hold our attention and try and get us
involved we need the above-mentioned points to get much stronger. We need to see
more and more accumulation and in a powerful way. A solid, 2% rally in the broad
market on above-average volume would be a start. New, fresh growth stocks
emerging from 7 week or more price consolidations would also be welcomed to
carry the market much higher. For now, uncertainty remains and with this in
place, investing with strong odds is not so conducive.

Enjoy your weekend!