Market Action Continues To Improve
Since the market put in a low on February 24, 2022 as Russia invaded Ukraine, we have started to see some signs of an improving environment. This week's action was also constructive and can be viewed as another step in the right direction. The Nasdaq saw some strong volume come in this week and today's action constitutes an O'Neil "Follow Through Day." We also saw some accumulation come into the S&P 500 this week which is another bullish sign.
What has most impressed me is that we have seen strong action in some growth stocks recently, such as RMBS and SWCH which both broke out on volume. JNPR also had a great week, and I opened a position as it cleared recent resistance. This is a stock that has shown impressive relative strength over the past two months, something I always like to look for in a stock while the market corrects.
A strong indication of a new bull market would be an increase in the number of stocks either approaching new highs or making new highs. The New Highs/ New Lows reading on the Nasdaq is still negative, but has shown lots of improvement over the last month.
Sentiment has also gotten pretty negative over the last few months which is another bullish sign. I would, however, like to have seen the VIX crack above the 40-50 range for one final bearish thrust. This can always happen in the coming weeks, particularly if bad news comes from Ukraine.
My watchlist of stocks has been growing, which is an important indication of improving conditions. Some of symbols I'm watching most closely include PANW, REGN, VRTX, and ORLY.
I am only about 16% invested at the time of this writing as I would like to see the market continue to act with resilience before I commit more of my capital. Things can change very quickly, especially with all that is happening currently both domestically and abroad. I can see a scenario where the market has another leg down over the coming weeks to provide one final shakeout, or I can see the possibility of some sideways action to let some bases form out. Either way, keep building a watchlist of stocks you would like to own that are exhibiting strength. Continue to monitor them for entries points and only get aggressive if the market proves to you the bottom is indeed in.
Risk right. Sit tight.
Full Disclosure: I currently own JNPR.
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