Friday was yet another display of positive intraday price action by the overall market as an early morning sell off found support shortly after 10am and stocks spent the rest of the session rallying higher. The difference this time is that there was not any late day surge sending prices out near the highs of the day. Volume was basically flat compared to the session before which means that even with the down session overall it was not technically a distribution day. Especially considering the rally off the lows. All in all, it was a very healthy week of price action in the overall market and individual stocks. There is not a lot to complain about, if you are bullish and/or long equities.
Friday’s action was overall much less eventful than compared to the previous three sessions this holiday shortened week but that being said there were still plenty of excellent price moves as you can see below in the stocks on watch list. The continued strong breadth combined with the still pessimistic overall sentiment in the market gives us a great chance that stocks should continue to rally here. When you consider that all four momentum oscillators that I track on the four major market indexes are still not at extreme overbought levels this is even further confirmation that further upside is probable. It doesn’t mean it has to happen it just means that right now the odds are still in favor of the bulls.
I would prefer it if the market decided to move sideways or trade slightly lower in an orderly fashion so that we can separate the true leaders from the laggards that are rising the overall tide of the market. I have way too many long positions on the books for my liking and would like to cull the laggards and move that capital into the names that are currently leading my portfolio higher. The best way to do that would be for this market to have some kind of orderly pullback. However, knowing what we know about this market, extreme moves up and down are what is normal so I will not be surprised if I do not get my well wished for pullback.
This is without a doubt the best uptrend I have seen in terms of long rounding out technical patterns with the proper accumulation characteristics that I have seen since QE started in 2008. The previous uptrends post 2008 have been fraught with technical issues and overall various problems too many to mention here in any reasonable amount of space. While this is the best setup in terms of individual stocks I have seen since 2008 you can be sure I am not going to operate without stops like I did pre-2008. I still have stops on the books because the same problems still exist today in this uptrend that has existed in all of them since 2008. IBKR is just a recent example. IBKR is already producing a 50% EOD sell signal despite two huge accumulation days right at key technical support.
These sort of setups from stocks like IBKR could be relied upon always to produce large gains immediately. Instead, as you can see on Friday, it did not move higher immediately and while the overall pattern is fine it is still a reminder that the market uptrends of the 2010s are nowhere near the market uptrends of the 1990s and early 2000s. It is what it is. This is why I will continue to operate with hard stops on the books in liquid stocks until the overall market starts to uptrend on huge accumulation. Large volume in the overall market on up days is still the key missing ingredient that we simply have not seen during any of the rally attempts post 2008. This one included. It’s hard to be a cocky bull without it. Consider me a cautious bull here.
Have a great rest of your weekend everyone. I will see you all on Monday. Aloha from a very beautiful and warm west side of Maui.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – SIGNAL DATE
CLR long – +120% – 2/11/16
GRAM long – +62% – 4/1/16
EBIO long – +58% – 5/26/16
SIMO long – +30% – 3/11/16
APLP long – +30% – 3/31/16
ABTX long – +26% – 4/13/16
