Monday, January 16, 2012

So Far So Good for the Third Leg of The Bull Market

We couldn't have asked for better trading action in the stock market since the beginning of the year.  Leading stocks are breaking out daily, new leaders are working on their consolidations and preparing to breakout, bad news is shaken off within hours and bought on heavy volume, and economic numbers point to a growing economy.

Pullbacks in the stock market

should be bought.  Based on the positive action, the burden of proof is on the stock market to prove it does not want to rally.  Otherwise if a stock is acting right, then sit tight.  If my analysis is correct about this being the third leg of the Bull Market that started back in March 2009, then we are still in the early innings of this uptrend.

Many continue to disbelief pointing to problems in Europe, the continued devaluation of the US$ by the FED, accelerating inflation, China slowing down, etc.  All this could be around the corner, but right now the stock market and its underlying stocks are acting like stocks and markets do in a bull market not a bear market.  They breakout on heavy volume, pullback on light volume, find support at moving averages, and continue higher on heavier volume.  That's what we got.  If the bad news is going to get worse, we will see distribution, stocks breaking down, breakouts failing, etc...  Then we will take action to move to cash and/or get short.

Many leading stocks have not yet broken out.  So there is still time to get on the train.  At some point the train will speed out of the station and you will then have to be patient to wait until the next stop (pullback) to get back on.  But you will once again face the negative winds of a falling stock market(pullback), bad news, but stocks acting right.  It is never easy to interpret fully in the beginning, only in hindsight.  Clues should always be taken seriously even when everything feels so bad.  That's exactly when things turn for the better.

Use the leading stock analysis section to start your research (explained).  Comments always welcome.  Good Luck.
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