The Rogue Investor » IBD

Market Caps Off Terrible Week With Full Confirmation of Correction

Alex — Fri, 30 Oct 2009 23:50:49 +0000

And just like that, the rally is history. Today was the second big day of selling as the major indexes closed down over 2% – some closer to 3%.

The market is in correction and now the big question most investors will have is how far will it fall. Nobody knows, but all we need to do now is ride the wave down.

I added positions in the two ETFs I highlighted previously after they continued their breakout.

IBD suggests that we not short on the downside breakout, but rather on the first sign of weakness after the first pullback. Right now we have a little over 4% before the S&P hits the 200MA which could provide a bounce so I am still in favor of holding ultrashorts that would give us enough room to hopefully never fall down 5% on a pullback.

Otherwise, be patient and wait for the pullback. Regardless of what you do, know that we are in a down-trend now and could be for quite some time.

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Market Analysis: Churning at the Top

Alex — Mon, 26 Oct 2009 02:52:24 +0000

The markets failed to move higher this week, the Dow closed down 0.24%. IBD has classified the up-trend as “under pressure” due to the numerous distribution days and I find myself curious as to how much longer the market can keep things moving higher.

Just a quick glance at the chart above and you can see that we have been having more down days than up days in the last two months.

At the recent high, the market has rebounded an astounding 54%. My question for you is what has changed since the bottom?

One opinion is that people moved their money into stocks because of their liquidity. I think there is definitely some truth in that idea, but think it mostly boils down to the same thing that moves the market every time: smart money deciding they are bullish/bearish.

On a longer time frame (March-Present) the current volume is tiny, although increasing. The fact of the matter is we may not see huge volume at the top, but rather the selling will take place on the way up and will continue until the market rolls over.

For now, stay on your toes and hold off on adding any long positions. This next week could determine a lot if we see big percentage losses accompanied with high volume.

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Stock Pick: BUCY

Alex — Wed, 14 Oct 2009 22:40:25 +0000

Here is another pick on a high-volume breakout. The stock gets a 99 IBD rating so we know the company is quality.

My concern here is all about the volume. This stock has followed the major indexes very closely and just like them, the overall volume has dropped while the price continues to move higher.

Optimally, we would like to see a follow-through day on increased volume to verify the demand for the stock. Based on the trend, I wouldn’t be surprised to see a pullback in the near future though. Put it in the watchlist and see if we get strong action in the next couple of days.

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Stock Pick: RINO Breaks Out on High Volume

Alex — Tue, 06 Oct 2009 00:38:07 +0000

This stock has had a great looking breakout from a solid base on ultra-high volume. All the recipes for success.

The overall trend is up and IBD gives the stock a rating of 99 which is as high as it gets.

My main concern now is the trend of the major indexes. We did have a mostly bullish day today, but the up-trend is under pressure and going long in a down market is a terrible idea in general.

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Market Trend Under Pressure After Supply Hits

Alex — Mon, 05 Oct 2009 01:38:44 +0000

We are at an uncomfortable stage in the market: it’s not going up, but the rally isn’t over.

When determining when a rally is over, IBD says to look for a slowdown in price action, pickup in volume, and 3-5 distribution days over a couple weeks.

In the S&P I’ve got 4 distribution days marked on the chart above. Prices have stalled but have held above the 50MA and volume has picked up lately.

Until we have some breakdown in support though, all this isn’t enough to call the rally dead. For now, best bet is to sit tight and let the market make its moves.