Yesterday’s market action made me bit nervous about whether this uptrend would continue. While it wasn’t technically a distribution day due to the lower volume, we did lose 1.5% on the NASDAQ while breaking the 10 day moving average. And yes, we all took a hit in our portfolios.

Today however, my confidence has been restored. Here is why today action on the major indices was constructive:

  • Volume was higher during today’s rising action than on yesterday’s falling action – signaling net accumulation in the market.
  • We negated the weakness of yesterday’s pullback by bouncing immediately and closing above yesterday’s high.
  • The distribution day count has recently fallen to 4 on the NASDAQ and 3 on the S&P.
  • The price action on many leading stocks is continuing to tighten up – producing numerous “three-week-tight” and “flat base” patterns. Most stock charts in our universe look good overall.

I’m taking the time today to reaffirm the strength I’m seeing in the market, my portfolio and individual stocks so that it might be mentally easier to stick with this rally and give it some room for larger gains. We don’t know how long this rally will last, but for now we know it’s constructive. As always you must buy exactly right on the chart. Don’t just buy based on the name or the fundamentals. Find the lowest risk entry you can find on the chart. If you would like guidance on interpreting the charts, call your MarketSmith product coach for help at 1-800-424-9033.

Best Returns,

Scott O’Neil

President, MarketSmith Incorporated

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