Caution and Patience

I thought last Thursday that the market was ready to roll over. It looked like too much distribution too quickly into a new rally, plus the Dow and S&P 500 were turning tail at their 50 dma again. Friday didn't do much to change my mind, as the market moved significantly higher but on lower volume that Thursday - I thought this set up for a drop on Monday.

On the contrary, today the indices each cleared a moving average - the 200 day for the Nasdaq and the 50 day for the Dow and S&P 500 - and did so on higher volume. This is pretty bullish action. Add to this the negative news the market has absorbed recently and it makes a case that this rally has some legs.

Another concern though is the number of failed breakouts. I've seen more high quality stocks stage strong breakouts only to collapse a few days later. This is not the action I'd expect in a strong rally. It could be a rotation of leadership, or a sign that this market is living on borrowed time.

For now I'll continue to go slowly. I have my existing position in (THOR) and I've identified another stock I may buy tomorrow depending on the action of the market and the stock itself.

-Geoff