Top 10 Report – March 18, 2020

Market Insight

The major indexes have continued to drop precipitously since the last report. The NASDAQ and S&P 500 made lower lows shortly after the open yesterday, but then turned and rallied for the rest of the day and closed near session highs as volume picked up from the day before.

One big rally day off the bottom means absolutely nothing, however. Unless day-3 of a rally is overwhelmingly powerful and healthy leadership is soundly in place, the soonest a follow-through day can occur is on day-4 of a rally. Ideally, follow-through days should occur on days 4 -7 of a rally attempt. However, there have been plenty of follow-through days that have showed up much later than that, which still led to significant gains.

At this juncture, most of the market’s prior leaders have dropped sharply with the general market over the last few weeks, many of which are badly damaged and will never return to their old highs. Ultimately, this is considered normal, healthy behavior.

Nevertheless, even if we see a follow-through day happen as early as this Friday, without a broad base of fundamentally sound leadership, ready to break out of well-formed bases, it is highly unlikely that a sustainable general market uptrend will ensue.

Therefore, tonight’s report, like the last couple is atypical due to the extreme conditions. It contains the stocks that continue to hold up the best while the general market remains under extreme pressure. Ideally, the best of these stocks will eventually emerge as some of the most powerful leaders of the next major uptrend in the general market, which is why it’s so important to maintain a fresh watch list.

Remember, the cheapest price is not always the best price. In rare times like these, I find it best to let the big institutions carve out the bottom for me and then jump on their coattails once the odds of a sustainable uptrend are highly in my favor.

It’s not all that different from counting cards, where you absolutely do not play unless the deck is hot, and right now… the deck ain’t hot.

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.

Once again, 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 in real-time during the day.

The Indicies

The NASDAQ undercut Monday’s low shortly after the open yesterday, but ultimately turned and rallied 6.23% and closed near its high for the day as volume picked-up from the day before, which makes yesterday day-1 of a new rally attempt.

The Russell 2000 undercut Monday’s low shortly after the open yesterday, but ultimately turned and rallied 6.66% and closed near its high for the day as volume picked-up from the day before. Regardless, the small cap index continues to lag well below its long-term 200-DMA.

The S&P 500 undercut Monday’s low shortly after the open yesterday, but ultimately turned and rallied 6.00% and closed near its high for the day as volume on the NYSE picked-up from the day before, which makes yesterday day-1 of a new rally attempt.

The DOW undercut Monday’s low shortly after the open yesterday, but ultimately turned and rallied 5.20% and closed near its high for the day as volume picked-up from the day before. We have yet to see back to back up days on any major index since the market topped about a month ago.



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March 18, 2020