Market Analysis and Summary
The NASDAQ, S&P 500 and DOW all held up in a relatively tight manner and finished above their 50-DMA’s last week. Whereas, the action seen on the Russell 2000 was a bit choppier and it spent the week living below its 50-DMA. Except for Wednesday’s sharp, negative reversal on heavy volume after the Fed minutes were released last week, the general market held up quite well. Especially considering a lower than expected March payrolls number, the Fed’s commentary regarding the market’s “lofty valuation” and a cruise missile attack on Syria.
More importantly, leading growth stocks are in good shape and the process of healthy rotation is still underway. So, as the major indexes continue to consolidate, leading growth stocks will have the opportunity to finish forming new, constructive bases and break out, ultimately sustaining the market’s uptrend. Currently, there are plenty of leading stocks setting up in the technology and medical/biotech groups. Also, residential building and building related names are still exhibiting relative strength, which is a good indication that investors are not all that concerned with rising interest rates. The leading financial and steel stocks could certainly look better, although it wouldn’t take more than a few days of upside from here to get them back into decent shape.
While we wait to see how this all plays out, discretion remains the better part of valor. Use this time to make lists of the highest quality growth stocks that are building constructive bases and exhibiting the greatest relative strength. Except for positions with big cushions of profit, that haven’t triggered trailing sell stops, we would keep exposure to a minimum and always keep in mind, cash is a position. On the other hand, things can change very quickly, so always have your alerts set and be ready for anything.
NOTE: The entry areas discussed in the charts below are either for very active traders, or for when the pressure comes off the general market and leading growth stocks are breaking out again.
The NASDAQ fell 0.02% as volume declined Friday, although it finished the session near its high for the day and only slightly below recent all-time highs.
The Russell 2000 rose 0.01% as volume declined and finished the session near its high for the day, although it closed below its 50-DMA.
The S&P 500 fell 0.08% as volume on the NYSE declined, although it continued to hold above its 50-DMA and closed in a tight manner over the prior few sessions.
The DOW fell 0.03% as volume declined, although it continued to hold above its 50-DMA and closed in a tight manner over prior few sessions.