Today (10/2/14), the market sold off early but rallied back on strong volume. Here are my thoughts:

1) I like how the Russell 2000 $IWM undercut the low it made earlier this year (2/5/14) and outperformed today. The index has led us on the way down. Now, we need to see if it can lead us on the way up.

2) The Nasdaq Composite and S&P 500 retested the area they emerged from in August. In addition, two key growth stocks I watch $NFLX and $TSLA also retested their recent breakouts.

3) The key right now for the bulls is to see all these levels (today’s lows) hold. More importantly, we need to see no distribution over the next few days and a “follow through” day next week on strong volume (to show that institutions are back to committing capital). There’s been too much selling into strength recently, and that obviously needs to end in order for the market to move higher.

4) Sentiment has turned extremely negative, which is a positive sign from a contrarian view. Two examples include the low reading seen in the CNN Fear & Greed Index and the NAAIM Survey.

5) Here are a few growth stocks holding up well: $MBLY $TWTR $PANW $REGN and most big cap Biotechs.

We are still not out of the woods yet. I turned cautious recently because there’s too much professional selling. Until this changes, I am still keeping my positions light. I am also keeping an open mind to many possibilities. Hopefully, conditions improve soon so we can take advantage of a traditionally strong time of the year. Good luck!

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