Here is my reasoning and some observations over the past few weeks:

1) The most important criteria I use to gauge the market’s health is the action of its leading stocks. Right now, THERE ARE TONS OF SOLID FUNDAMENTAL COMPANIES BUILDING AND BREAKING OUT OF STRONG TECHNICAL BASES!

2) Market Resilience: On Thursday, February 18th, the Fed raised the Discount Rate by 50 basis points but the market shrugged off the news and finished higher the next day. On Thursday, February 25th, the market ignored poor US economic data and fears about Greece’s debt problems to once again rally and close near the highs of the day. The market’s ability to rally in the face of bad news is a “subtle tell” that it wants to go higher.

3) Sentiment indicators shifted from extremely bullish in mid-January to extremely bearish in mid-February. The recent heavy put buying shows there is still plenty of doubt out there.

4) The major market indexes are back above their 50-day moving averages, a sign of health from a technical perspective.

5) Oh yeah, did I mention the number of stocks that are breaking out across several sectors??? Semis: $NETL $ATHR, Big Caps: $ISRG $BIDU $PCLN, China: $CAGC $CTRP, Retail: $DECK $ANN $SKX Miscellaneous: $SNDK $CMG $CTSH $RDWR $SMCI.

Here’s my best advice: I would SLOWLY begin to add to your positions (assuming you’re at a profit on new purchases over the past few weeks and that you have a cushion to work with). DON’T CHASE EXTENDED STOCKS and DON’T JUMP BACK INTO THE MARKET ALL AT ONCE! Why? Because you will just get stopped out on any normal pullback. Keep a list of stocks building sound technical bases and buy them as they begin to breakout. Examples of stocks on my watch list include: $ARST $CLNE $DNDN $VPRT $GMCR $PLXS $HGSI. As always, keep your winners and cut your losers.

Please keep in mind that the purpose of this blog is to help people with idea generation. If you trade some of these stocks, PLEASE, PLEASE, PLEASE use stops. In other words, if some of these stocks turn against you and the market doesn’t cooperate…protect your portfolio! Thank you. Good luck trading!

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