Outside of the Nasdaq and Nasdaq 100 stocks staged another overall impressive intraday session on Friday with the Russell 2000 and the DJ-20 leading the way higher. Volume was mixed on the session with volume higher on the Nasdaq but that should be of no surprise following the MSFT GOOGL and SBUX misses. Outside of those three stocks, it would have been a fairly decent session for the four-letter heavy index. The best news for the Nasdaq is that is closed higher than from where it opened. Hard not to like that kind of action on a down day.
If the Nasdaq would not have had a rough session on Friday it would have been an overall pretty darn constructive week for the market with the Russell 2000 and DJ-20 leading the way. Still all in all it was a solid week where we were able to start to separate the wheat from the chaff. The Utility, Metal/Mining and REIT related stocks got hit hard but the Biotechs and Growth stocks took in the money taken out from the former sectors. This kind of rotation is, in my opinion, healthy. As long as the higher beta related names continue to come under accumulation, I will be OK with money rotating out of the Defensive related names.
The best possible short-term scenario for the bulls continues to develop as I, once again, had so many names trigger in my high quality long scans as stocks to either watch or take long positions in. I am still very nearly fully invested just rotating out of weak names–like YORW and RHP on Friday–into new names that are breaking out above short-term resistance levels like LGIH. Just looking at some of these names like SHEN GLOB CDNS MLHR EVA TSLA WIRE and MRCY, it is clear that this market is in no short order of very bullish technical patterns.
This rally attempt still is not perfect as I have yet to see one single “perfect” setup out there in quality or speculative names. This is why we have a lot of small positions rather than a few large positions. The good news is that I got fully invested rather quickly despite this and, for now, most stocks are working according to plan. There have been some hiccups this past week as I posted in my Sell columns but overall it was a good week for my holdings considering how they could have pulled back following Friday’s session in the Nasdaq.
I have a feeling it is not going to be easy for this market to trade back above the 2015 highs without those levels putting up a stern fight. The longer we hold up here and the more consolidation patterns that develop in leading stocks the higher the chances we will breakout past those levels and stay there. However, if we start to back and fill with more distribution and churning showing up and more and more stocks acting like COKE and STOR then I will start to raise my caution levels and my stops.
For now, it is steady as she goes. The Russell 2000 and DJ-20 look great and as long as they are holding up well I will continue to err on the side of the bulls. I am ready for this to change at a moment’s notice but until it does I recommend going with the trend as you never know when it is going to end. Better to wait and know that it is actually ending before anticipating it. It hasn’t worked for the past seven years. I wouldn’t be too quick to jump the gun here either. Have a great rest of your weekend and I hope to see you in the chat room. Aloha.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – SIGNAL DATE
CLR long – +104% – 2/11/16
GRAM long – +67% – 4/1/16
FPRX long – +41% – 3/18/16
OLLI long – +30% – 2/24/16
