Power Move

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Nothing can take away from the Nasdaq’s breakout Monday – leery as I am of taking long positions here…

Bulls want to see tech bid well. Without it, not much can be hoped for in a Bull market. 

Issue at hand now is not only how we close, but what kind of volume and leadership backs this breakout.

Textbooks Are For Losers

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Major indexes have put in a textbook like bounce off their 50-day moving averages.

We’re still suspicious of any sustainability to the rally. We could easily see new highs, but broad participation and solid leadership will need to be present before we reverse on our pullblack/correction prediction. Outlook for the year is still bullish.

Tops are often processes. Stay tuned. 

Funds Jump Ship

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The Bear served a clear warning to the market with heavy sell volume flooding the major indexes for Monday.

Our outlook remains the same as it has for months: we await a pullback or correction of  at least the 5%+ variety while keeping a bullish intermediate-term view.

Now is not the the time to be buying growth stocks. Rather, aggressive traders may consider shorting semiconductors, as this bellwether group often provides the kind of sharp moves to allow for quick and sizable profit taking.  

Blowing The Roof Off

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It’s good to see an all time high for the S&P 500. Now back to business. 

We’re not loading the boat on new long positions for some very sane reasons:

  • Breakout growth stocks are not well bid in this environment  Money is moving to safer, blue chip type vehicles. 
  • It’s generally not a good idea to to chase new highs on the major indexes after long run ups. New highs from smaller, growth names is an entirely different story.
  • A handful of distribution days is telling us large institutions don’t seem to be on board with a new leg up in the market. 
  • In a few weeks weeks we’ll be in the month of May, a traditional time to walk away. 

Perhaps we’ll follow up with some short setups here, if the market presents them.

SPLK Breakout Watch

Splunk Inc (SPLK)

Here’s a weekly chart look at quick growing Splunk, Inc. (SPLK), a “big data” cruncher that supposedly gives companies an edge through “monitoring and analyzing everything from customer clickstreams and transactions to network activity and call records” among other things.

From a technical perspective, we like that its’ poised to bust out of a six month base, though would like to see more heavy buying from institutions and a stronger market to support. it. On a 1 to 10 scale: This is a 7.

Sales have been growing more than 50% for the last four quarters (on a quarter over quarter comparison.)  These guys have yet to post any earnings growth, though for the quarter ending Jan. 31 they were up by 200%.according to Thomson Reuters data.

Breakout Lacks Punch

Just a kiss away from a new high.
Just a kiss away from a new high.

That’s what we call safe money powering the Dow’s new high. 

It’s the sturdier, cyclical type businesses that funds have been buying to help the major indexes along to higher levels as aggressive growth stocks fail to attract bids.

We never argue with the market.

If indexes make new highs, so be it. All we really need to know is it’s not a good time to by buying growth stock breakouts. Odds are we’ll see some kind of spooky sell off once bids for even these safe vehicles tapers off. 

Let’s see if we can find some shorts.

Indexes Hang On

S&P 500 April 8th, 2013

Modest upside on light volume Monday isn’t much to write about. 

Let’s see what kind of trend earnings season will give us. Stocks that stay strong on bad news are telling us they’re really strong. Stocks that sell on good news are giving away real weakness. 

We’re holding our short-term pullback/correction bias, though remain bullish for the intermediate term