Top 10 Report – March 4, 2020

Market Insight

The major indexes have whipped around wildly for the last 7 sessions which in and of itself is not constructive behavior. Regardless, tomorrow is day 4 of the current rally attempt since the market fell into correction last week. This means it’s the first day that either the NASDAQ or S&P 500 can potentially follow through.

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.

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.

That being said, many of the leaders that were trading in a tight and organized manner just a week and a half prior, have become whippy, wide and loose much like the major indexes. This is not constructive behavior and time will be needed from here for things to shape back up and look healthy and constructive again.

The McClellan Oscillator and VIX remain at extreme levels, although the Put/Call ratio declined considerably.

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.

Now that the market is back in correction mode, most traders should find themselves down to their core profitable positions and/or in cash. Until the general market signals that a new uptrend has begun, use this time to refresh your watch lists and review old trades.

The Indicies

Yesterday was day-3 of the NASDAQ’s rally attempt which began on Friday last week, making tomorrow the first day it can potentially follow-through, although yesterday’s failure and reversal at its 65-EMA was not at all encouraging.

The laggard, small-cap Russell 2000 rallied off its lows with the other major indexes over the last few days, although yesterday’s rally failed well below its 200-DMA, it closed down 2.13% and near its low for the day as volume expanded, which is not constructive action.

Yesterday was day-3 of the S&P 500’s rally attempt which began on Friday last week, making tomorrow the first day it can potentially follow-through, although yesterday’s failure and reversal at its 200-DMA was not at all encouraging.

The DOW rallied sharply off last Friday’s lows, although yesterday’s rally failed below its long-term 200-DMA, it closed down 2.94% and near its low for the day as volume expanded, which is not constructive action.



More .Content
March 4, 2020