Stocks put in a very impressive drive higher as another round of short-squeezing hit investors who were a little too heavily short coming into today. The reason why I would call this another short-squeeze rally is that, once again, volume has fallen on a day where the market rallies an extreme amount.
If you are playing the indexes on an intraday or very short term basis, the volume is not important and all you will need to focus on is the price action. Then you either move with the trend and/or use support and resistance on price charts to implement your methodology. However, when it comes to wanting to build stock/option positions over a period of time and reap the huge rewards that come to those who invest with those, you need to see volume expand on the rallies and retreat on the pullbacks before you can feel confident to go all-in long with full margin.
Until we find volume showing up on the rallies on the indexes, with pullbacks showing lower volume, and then while that happens see leading stocks at the top of the industry group list leading with the individual leading stocks in those sectors setting up and/or breaking out, there is no reason for active-investors who have a track record of making money on the long side in bull markets to go long.
Only once our setups come again (which a few are STARTING to show up) and then fulfill their basing period to launch off that springboard, will it be okay with me to tell you to start loading up your portfolio and watchlist with the best looking stocks.
However, this scenario does not appear to be happening off this low volume rally attempt off the lows. While it could lead to a possible higher high that could then help all of these stocks go from choppy and volatile patterns to nice and round pattern, the majority of stocks are still in very heavy downtrends.
Even banks that have been bailed out are bouncing on mediocre volume and even though BOP is turning green ultimately these stocks have to see massive financial investments by big money managers before they will finally settle and start to build higher highs. But not only are the banks very important to bottom before we can look for a rally but tech stocks must try to work on building bottoms before I can turn bullish. Why? technology is what brings us our most innovative companies.
However, the truth is, not until these stocks AND LEADING STOCKS at the top of the industry group list are rallying hard on the up days and either not losing money or gaining a little on down days, we just will not have a market that is going to be a long-term uptrend. A bear market rally can make us a lot of money. Go study my Past Big Winners from 2000-2002 to prove that even in a bear market, as long as it doesn’t turn into a market like the 1930s and now, will always have a few stocks that make us big money.
While we didn’t have any this downtrend, we did have DGLY and PDO that did fairly well from April to June. Since then, there has been NOTHING.
