We Are Due For A Short-Term Pullback
We
have been rallying strongly for the past couple of weeks with only a
couple of flaws. The major averages logged a day of distribution, or
professional selling in Tuesday’s trading.
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Normally, I would say to watch
out for further distribution because it usually marks the top of a rally; but in
this case it is a good thing I believe. I base this on the market’s performance
of the past couple of years. Each time we have seen strong accumulation,
leading growth stocks pushing higher and strong sectors the top has been in and
a correction has followed. At this point, I
almost like to see things that put a
little doubt in investors’ minds. The fourth quarter rally of 2004, for example
saw the indices march sharply higher for several months and the entire rally
began with extremely shaky follow-through days on below-average volume.
Strong accumulation pushed the
market higher towards the end of the fourth quarter of 2004 and we all know how
2005 has been thus far! For these reasons, it is a good idea to keep an eye on
the market. Growth set-ups have not been everywhere, but there have been a few
solid names pushing higher such as MCRS, BOOM, SRDX, CME, SSNC, BEBE and GOOG.
We are due for a short-term
pullback right here, but it will be VERY important to see how the market can
absorb a little profit-taking and selling. One thing to look into is the
NASDAQ-100 as a potential play out of a pullback.Â
Good Trading!
Tim Truebenbach