1) For the most part, stocks are holding up well.

2) After major Bear Market declines of 50% or more, the average new Bull Market lasts for 18-24 months with minor corrections along the way. We could be in month 11 of an uptrend that has more upside left in it.

3) The major averages are starting to stabilize on their Weekly charts. The price action is tightening up and the recent selling has occurred on lighter volume, a constructive sign overall.

4) Sentiment indicators have shifted from extremely bullish in mid-January to extremely bearish right now.

5) The dollar rally is over in my humble opinion.

6) Many short ideas on my watch list are not working out well. If this was a new Bear Market, these short ideas would have fallen apart by now.

I want to make something perfectly clear: I AM NOT SAYING THIS CORRECTION IS OVER! I am simply saying that some constructive signs are allowing me to shift my stance from a cautious mode to a neutral one. I suggest keeping a watch list of strong stocks that have held up well through this correction and being ready to pounce if the uptrend resumes in the next few weeks.

Since it takes approximately 6-8 weeks for stocks to build new bases, we could be in week 5 of a correction that will continue to “chop around” for a few weeks before a large number of quality ideas setup again. If you decide to start some new positions, I suggest keeping them light and letting the market prove itself before increasing your investment levels.

Some ideas on my watch list include: $GMCR $DNDN $NETL $NFLX $DSW $INCY $ISRG $BIDU $IPXL $CAGC.

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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