Top 10 Report – March 25, 2020

Market Insight

The major indexes gapped up at the open and closed sharply higher as volume expanded across the board yesterday. Monday’s action on the NASDAQ was sufficient to count as day-1 of its rally count, which makes yesterday, day-2. Therefore, this Thursday is the earliest a follow-through day could possibly occur.

However, as we discussed in the prior report, without a broad base of fundamentally sound leadership ready to break out of proper bases, it is highly unlikely that a sustainable general market uptrend will ensue.

Given the current state of the market’s leadership, it’s hard to imagine that it will be looking healthy enough to support a sustainable new uptrend in the general market within the next 2 or 3 days, although stranger things have happened.

Major damage has been done to most of the market’s prior leadership and more than likely time will be needed for new, constructive bases to develop from here. Remember though, we are in the interpretation business, not the prediction business.

So, in rare and extremely volatile times like these, I find it best to sit in cash and protect financial and emotional capital, while I let the big institutional investors carve out the bottom. Then, when the time comes, I 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 yet.

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.

The Indicies

The NASDAQ gapped up at the open, rallied 8.12% on heavier volume and closed near its high for the day, marking day-2 of the latest rally attempt.

The small-cap Russell 2000 rallied sharply off lows with the other major indexes yesterday and finished the session near its high for the day as volume expanded from the day before.

The S&P 500 gapped up at the open, rallied 9.38% as volume on the NYSE expanded and closed near its high for the day, marking day-1 of the latest rally attempt.

The DOW gapped up at the open, rallied 11.37% and closed near its high for the day as volume declined, yet finished well above average.

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March 25, 2020