Healthy Economic Data Helps Stocks

Healthy Economic Data Helps Stocks

Looking at the market, the latest rally attempt was confirmed when a “cautious follow-through day” was produced by the Nasdaq Composite on Monday, March 1. Weighing into the decision to label the day a follow-through-day (FTD) was the strong action in leading stocks along with a great expansion noted in the new highs list. That action suggests that there is a healthy crop of strong stocks capable of fueling a substantial rally higher for the major averages. We will be looking out for any near-term distribution days (high volume declines) which would hurt the chances for this nascent rally. Until then, the bulls deserve the bullish benefit of the doubt as the major averages continue edging higher.
It is a welcome sign to see the market continue to improve as investors digest the latest round of stronger than expected economic and earnings data. Remember that now that a new rally has been confirmed, the window is open to start buying high quality breakouts. Trade accordingly.

Day 3 Of A New Rally Attempt

Day 3 Of A New Rally Attempt

Looking at the market, Wednesday marked Day 3 of a new rally attempt which means that as long as Monday’s lows are not breached, the earliest a possible follow-through day could emerge will be Thursday. However, if Monday’s lows are taken out, then the day count will be reset and the chances for a steeper correction increase markedly. It is also important to see how the major averages react to their respective 50-day moving average (DMA) lines. Until they all close above that important level the technical damage remaining on the charts is a concern. So far, the market’s reaction has been tepid at best to the latest round of economic and earnings data. Remember that the recent series of distribution days coupled with the deleterious action in the major averages suggests large institutions are aggressively selling stocks. Disciplined investors will now wait for a new follow-through day to be produced before resuming any buying efforts. Until then, patience is key.