1) I never thought the Market went into correction in the first place because I only counted 3 recent distribution days on the NASDAQ Composite. I mainly focus on the NASDAQ because it is THE LEADING INDEX and it’s where the majority of winning stocks come from.

2) I’m not a big fan of looking at distribution on the Dow because I think it is THE WORST index to follow and I haven’t traded a stock on the Dow in over 10 years!

3) Over the past two weeks, I have owned between 14-16 stocks for my clients. That is the most number of positions I have owned in a long time. Other wise traders I know have been on margin recently. My point is there are TONS of set-ups and many of them are breaking out.

4) Examples of strong stocks include: $HSFT $AAPL $FFIV $LULU $SHOO $MEAS $TDSC $CMI $SNCR $CIS $KH $RAX $PAY $CMG. I’m not recommending to buy these stocks here, I am simply showing examples of stocks that are acting well technically.

5) The Russell 2000 is at a new high! How can the market be “in correction” when one of its major indexes is making highs?

The point of this article is not to make fun of IBD because I highly respect their work and I have a few good friends who work there. My point is: 1) Pay attention to the price action of stocks! If solid fundamental stocks are breaking out of sound technical patterns on strong volume and holding, that’s a healthy sign…PERIOD! 2) Do your own work and don’t blindly follow anyone or any publication. Use blogs and newsletters as a guide, but ultimately trust your own instincts.

Of course a few things concern me about the market, specifically the economic problems in Europe and the high bullish sentiment. However, the most important thing to focus on is the price action of stocks…and right now leading stocks are acting well. My best advice from here is continue to find high probability setups, take profits into strength, and ALWAYS USE STOPS to protect your portfolio in case your positions turn against you. Good luck trading!

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1) It is important to keep an open mind and stay on top of the market on a regular basis. If you trade stocks or manage money for a living, you should be looking at stocks on a NIGHTLY basis. Why? Because the market is so dynamic and can change quickly.

2) I am not saying we are out of the woods yet. I’m simply pointing out that stocks are STARTING to look better.

3) If the stocks on my watch list can breakout on strong volume and hold, I would feel more confident committing capital.

4) If the major averages can get above their 50-day moving averages and hold, I would also feel more comfortable. We are close now, but keep in mind this has been an area of resistance for the market lately.

5) Some stocks on my watch list include: $NFLX $APKT $PAY $FNSR $SLXP $CRR $CTSH

6) A few stocks have held their breakouts so far, a positive sign. Examples: $ROVI $PWER $CLB

7) I like how the market ignored the Moody’s downgrade of some European countries on Monday, and also shook off weak earnings from $IBM and $TXN to close higher on Tuesday.

8) The past 12 trading days have come on below average volume, showing that institutions are not participating. I would REALLY like to see volume pick up in order to feel more confident about a sustained uptrend.

Conclusion: I remain cautious, but I am not opposed to taking some light positions to see if this market can prove itself. There’s no need to rush back into stocks. If your small “test” positions show you a profit then, in theory, plenty more stocks will setup and you can further increase your investment levels. If the market continues its recent downtrend, then at least you can get out with a minimal loss. As always, keep an open mind and maintain a watch list of strong fundamental companies building sound technical bases.

Please remember 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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I must admit that even though I expected the market to be resilient, I didn’t think that the futures would recover by Friday morning and finish positive by Friday’s close. I thought the Fed news would give the market an excuse to sell off over 2-3 days, and then we could look to buy the stocks that held up well during the decline. Instead, THE MARKET’S ABILITY TO SHRUG OFF THE DISCOUNT RATE HIKE COMBINED WITH THE NUMBER OF STOCKS I SEE SETTING UP SHOWS STRONG MARKET RESILIENCE AND TELLS ME THAT WE MIGHT SEE HIGHER PRICES SOON.

I still expect a “choppy” environment over the next few weeks; however, if more stocks breakout of sound bases on strong volume, I would look to increase investment levels. In the meantime, I recommend keeping position sizes light until the market continues to prove itself. Friday’s strong action is a great sign of the market’s improving health. As always, I suggest maintaining a watch list of stocks that are holding up well and forming proper bases.

My current watch list includes: $GMCR $HGSI $ISRG $NFLX $DNDN $CLNE $TSTC $IPXL $RDWR $CTRP $VPRT $NETL $ATHR $PAY.

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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Although I feel there may be more downside to this correction, I am keeping a close eye on the stocks that are holding up well. I actually don’t mind when the market corrects because that’s when the strong stocks stand out. For example, over the past two “down” weeks, I’ve been paying special attention to the stocks holding “up” well with the theory that when the market is done correcting, these stocks should continue higher. In other words, the recent correction is acting like a “spring” compressing these stocks down. Once the market relieves this tension, these stocks could breakout to new highs.

This is one of my favorite ways to use Relative Strength. You can read more in my blog post from last October titled: The Three Ways I Use Relative Strength.

Here is a current watch list of stocks holding up well: $GMCR $DNDN $CLNE $EVVV $ISRG $BEXP $SWM $ASH $PRX $RUE $MAPP $PAY $IMAX $PNRA.

I am not saying to go out and buy these stocks right now. I am simply encouraging you to keep an open mind and to maintain a watch list of stocks that are holding up well during this correction. Again, I still feel there could be more downside, but be ready to pounce on strong ideas as soon as the selling pressure is finished.

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