1) The NUMBER ONE criteria I use to evaluate the overall health of the market is the price action of leading stocks. Right now, I am finding many strong fundamental companies forming strong technical patterns. When I see this across many sectors, the market has a high probability of doing well.
2) Seasonally, we are heading into one of the strongest times of the year. April 9 to 21 is traditionally a very good period, as retirement/IRA money comes pouring into the market and money managers are forced to put it to work.
3) The Fed is out of the picture. The weak March Jobs report confirmed what I have been saying for a while now. The Fed will NOT raise rates in their upcoming June meeting. In other words, the teacher is out of the classroom and the kids might play for a while.
4) Many Big Cap tech stocks (such as $AAPL $NFLX $GOOG $PCLN $AMZN) tend to run ahead of their earnings. These companies all report earnings over the next few weeks.
5) Sentiment. This continues to be a hated rally and one full of skepticism. Many people are cheering for the market to go down and STAY down because they have missed this rally and are afraid to buy near new highs. Meanwhile, the major averages continue to show strong volume accumulation in their Weekly charts, telling me that institutions are still backing this market.
It’s possible we could see a strong run over the next few weeks before the “sell in May” phenomenon kicks in. We also might see a continued trend of muted gains for the indexes, but stronger gains for the leading stocks. Either way, I think the stars are lining up for a possible move higher over the near-term and I plan to take advantage of it. I will continue to focus my attention on the Generic Drug sector (as we will see more M&A activity in this group), Semiconductors, and Biotech. Good luck trading!
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