It’s has been an impressive past 8-9 sessions for the overall stock market as stocks continued their non-stop ascent to the September highs with the DJIA convincing leading the way. The rally has been steady with a few quality names building out consolidation patterns.

Unfortunately, there is a lot lacking in this price move. The volume on the move higher, while slightly above average, is not indicative of massive accumulation by institutional investors. Also, while some leading stocks are attempting to form decent consolidation patterns, most patterns are still very volatile with improper price/volume characteristics.

On top of this, the current batch of leadership is coming from the beaten down Chemical, Gold, and Oil sectors. We don’t really see any leadership in new innovative companies with large EPS and sales growth per any one industry group. If this rally attempt was going to usher in a major advance, we would probably already see some clear leadership in a more technology related sector.

So, for now, I believe it is wise to keep an open mind towards the possibility that this market is going to have to retest the lows maybe one more time before a truly powerful uptrend can begin. If that happens, you can be sure some stocks/sectors are going to show some clear Relative Strength compared to the overall market.

It is also possible that only a shallow pullback occurs before a new uptrend begins. It is also possible that we roll over to fresh new lows. The key take away from this is that we need to be ready for anything. We do not have any clear signals in the market or in individual stocks that tell me “for sure” that this or that is going to happen.

We do get those signals every once in a while and we definitely got them a lot more before QE started in 2008. However, most of the time we have what we currently have in the market. That is a lot of mixed messages in the charts. It is what it is. This usually means that there will either be more choppy volatile trading that goes nowhere and/or that leads to minor upside price appreciation. When everything is lined up, everything is lined up. Right now, everything is definitely not lined up.

That is why, despite the recent gain off the lows, the proper investment for most traders on a longer intermediate term basis remains cash. As long as my CANSLIM and Perfect Speculator scan continues to return low numbers of quality patterns, I will keep this as my major position. Eventually, the high quality signals will return (they always do) and I can begin to increase my operations in the market.

For now, most signals are mediocre and therefore I will position myself accordingly. With our directional models in the DJIA and SPX under a NEUTRAL condition and our directional models in the COMPQ and RUT under a SELL condition, it is the proper way to operate. We wish you all the best during the upcoming trading week. Aloha and don’t forget to take advantage of our free trial.

TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – SIGNAL DATE

ANAC long – 234% – 1/20/15
PAYC long – 131% – 10/30/14
SKX long – 112% – 1/26/15
COKE long – 71% – 6/16/15
APDN long – 61% – 10/2/15
EPAM long – 31% – 4/2/15
BIS long – 31% – 8/6/15