Drift

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A second week of modest, upward momentum scares the bears into covering short positions.

This dull and leadership lacking rally is suspect. No real evidence of institutional buying en masse. Volume is generally lighter. It’s not enough to tilt the scale from Sell Bias to Neutral. But that could happen with any solid, institutional sponsored up day.

This is the kind of upward drift that suckers dumb money into thinking the selling is over. If the selling is over, we’ll have plenty of time to setup up properly in high quality stocks with sound bases. For now, wait and watch.

Only stock matching our top scan this week was  TAL Education Group (XRS), a education and training services company out of China.

Still lingering from the scan a few weeks ago is Walker & Dunlop, Inc. (WD), a mortgage investment company, that has inched higher into a new base with a proper handle – still looking good.

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Bear Bumpin’

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This week, only TAL Education Group (XRS) met our stock screen criteria –  and is nothing to consider buying given the dominant bearish environment for U.S. equities.

We’re staying bearish for:

  1. Lack of upside leadership
  2. Lack of accumulation.
  3. All major indexes are traveling below their 200-day SMA’s.
  4. And most importantly, we’re not getting anything on our screens.

No point putting bullets in the air with no targets.

The above chart shows the Weekly version of the S&P. It would be just like a bear market to see a sharp rally about now. If it happens, watch where the money flows. Funds looking to get defensive will lean on utilities, maybe some healthcare, probably some sturdy and boring names.

On the macro side of things, it’s well recognized future earnings are under pressure with higher rates expected from the Fed and general weakening in the global market.

Last week WD was mentioned here for its breakout potential and its happening. This is counter to the strategy. It’s aggressive. Stay safe. Quick stop out of VNDA two weeks ago is a reminder. Losses are ALWAYS minimized. Winners are always given room to run.