Top 10 Report – January 27, 2020

Market Insight

The major indexes all closed lower last Friday, although volume ended mixed. Volume picked-up on the NASDAQ while it declined on the NYSE. This brings the distribution count to 2 days on the NASDAQ and 3 on the S&P 500.

The market has moved sharply higher over the last 4 months, so naturally the crowd has been waiting for the “big sell-off” to ensue. While a sharp drop may in fact be on the horizon, the bottom line is, nobody knows and more often than not, the market serves to fool the crowd.

Some leaders fell with the broader market last Friday, while others held up incredibly well. However, when we see a big outside reversals across all four major indexes after several months of moving sharply higher, it’s never a bad idea to reduce exposure.

Now is the time to pay close attention to how rotation takes shape and focus on the strongest names in the strongest groups, with the best fundamentals. The are the stocks you ultimately want to own and be concentrated in.

There is no need to panic, however, caution is the better part of valor at this juncture, so a little defense can’t hurt while we wait to see what cards come out of the deck next.

Keep in mind, the VIX Index and Put/Call Ratio spiked to levels that often coincide with rallies in the general market. Anything can happen, so keep your emotions in check and stick to your rules and your plan.

Stay focused on the very best of the best and wait for the perfect entry to develop, or do not trade. Set your alerts and be ready to buy these stocks as entry areas present themselves.

The Indicies

The NASDAQ made a new all-time high early in the session last Friday, but reversed, closed down 0.93% and near its low for the day, which is clear distributive action.

The small-cap Russell 2000 was the weakest major index last Friday. It declined 1.35%, closed near its low for the day, below its 23-EMA, but above its 50-DMA.

The S&P 500 started last Friday’s session higher, but ultimately reversed, closed 0.90% lower and near its low for the day, which is clear distributive action.

The DOW started last Friday’s session higher, but ultimately reversed, closed 0.58% lower and near its low for the day, but found support and bounced at its 23-EMA, which is a positive.



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January 27, 2020