Top 10 Report – March 11, 2020

Market Insight

The major indexes undercut their 2/28 lows on Monday ending the latest rally attempts on the NASDAQ and S&P 500. However, they both rallied powerfully yesterday, which counts as day-1 of a new rally attempt on both major indexes.

Remember, for a follow-through day to occur, either the NASDAQ or S&P 500 must rise at least 1.7% on more volume than the previous session. However, it’s important to keep in mind that we must also see fundamentally sound, leading growth stocks begin to form constructive bases and break out on heavy volume. Otherwise, it is likely to fail. Also, if distribution appears within the first few days after a follow-through day occurs, its chances of failure rises greatly.

While there has never been a new bull market or major uptrend in history that wasn’t preceded by a follow-through day, not every follow-through day leads to a new bull market, and it will always be the action of the market’s leadership that ultimately determines its success.

At this juncture most of the market’s leadership is in pretty rough shape. There are still some high growth leaders to be found trying to make stands at logical areas of support, like their 21 and 50-DMA’s. However, they are in the minority at this point and it likely wouldn’t take much to knock these names with the rest.

Keep in mind. corrections in the general market are the breeding ground for the next round of opportunities. So, continue to pay close attention to how rotation takes shape and focus on the strongest names in the strongest groups, with the best fundamentals. The first of these stocks to break out as the market follows through are often the best performers and hence, the stocks want to be concentrated in.

Until the general market signals that a new uptrend has begun, cash is king. Avoid the temptation to trade out of FOMO or boredom. Put on a couple very small “feeler positions” if you must. Otherwise, sit on your hands until the probabilities are heavily back on your side.

Other than the handful of charts discussed below there were very few other names worth mentioning in terms of being “actionable” in the current environment. Don’t forget, you can always join us in the chat room and monitor the market with us during the day in real-time.

The Indicies

The NASDAQ undercut the low of its first rally day and reset the count, which began again yesterday, making this Friday the soonest a follow-through day can occur.

The small-cap Russell 2000 undercut its most recent low last Friday and then continued to fall apart this week, although it managed to bounce and rally with the other major indexes yesterday, despite still being the laggard of the bunch.

The S&P 500 undercut the low of its first rally day and reset the count, which began again yesterday, making this Friday the soonest a follow-through day can occur.

The DOW undercut the its most recent low on Monday and closed near its session low, but rallied back and closed near its high for the day yesterday, although volume declined, which is less than ideal.



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March 11, 2020