The market uptrend is holding here and continues to show a slight upward bias. It is important that the market has held the gap made on January 2nd and seems to be slowly grinding higher. If the rally develops, then more names will participate, and those few that are slightly extended will probably give us another opportunity to buy them. The good news is there should be plenty of opportunities to increase your percent invested and participate in this rally, if it’s real.

 

One concern of mine is that a real bull market is broad and strong. This current rally is neither of those. If you are going to wade in, consider doing so with a few small positions to see if those can gain traction before going deeper. It’s key to start the year with extreme discipline; otherwise, you may create a huge hole that takes the rest of the year to dig out of. Psychologically, it’s a much better year when you’re trading for a profit, instead of trading not to lose more money. Also remember that we are in a fragile, news-oriented market, so being cautiously optimistic with lowered expectations and a short leash is probably prudent at this time.

 

Best Returns,

 

Scott O'Neil

President, MarketSmith Incorporated

Follow Scott O'Neil at Twitter.com/WScottOneil