Today’s Big Picture market overview in IBD, our sister company, is excellent. Paul Whitfield, the author, mentions several points of concern, most notably, “The indexes haven't been able to rise more than three weeks in a row this year, and the Nasdaq is working on week three now.”  One must note that the Nasdaq is up today on strong volume. 


Also of concern are the low volume rallies and several breakouts occurring on poor volume. Results from these recent breakouts have been mixed. This is not the strong action that we’d like to see from stocks breaking out. Many leading stocks are around their 52 week highs, but got there on mediocre volume. This underscores a lack of conviction within this market environment.


For me to turn fully bullish, the indexes would have to hold and consolidate here as mentioned in my prior blog posts. Then, as they lift off, there should be a healthy quantity of base breakouts to choose from to buy. At the very least, the leaders that have risen the last two weeks, that aren’t at new highs, should form handles to “shake out” weak holders and consolidate their recent gains. This would be very constructive. With that said, those bases would mostly be later stage bases. Discipline and patience are important at this juncture.


Net-net the market so far this year has been tricky and choppy. Stick closely to your rules, cut losses quickly, and play carefully. I haven’t seen very many meaningful rallies that started in the middle of summer, but if this does occur, I want to be there.

Best Returns,

Scott O’Neil

MarketSmith, Incorporated