10-11-14 Weekend comments

I have updated the high growth and volume trigger alert watch lists. With the market in correction I won't be acting on these stocks until the market calms down. One way to know if the market is starting to work is to see that growth stocks are starting to breakout and follow up with a rally. So I will be monitoring these watch list stocks for this kind of activity.

At some point the market will attempt a rally. The first day that closes up or if it makes a new low and it closes in the upper half of its range is called a Rally Day (or rally attempt day 1). On day 4 or later, as long as no new intraday low has been made is where we look for a follow through day. IBD Market School is currently revamping its follow-through-day threshold test procedure based on market volatility rather than applying a one-size-fits-all up 1.25% on volume higher than the day before. This is tending to depress the threshold over the last year closer to 1% but recent volatility will start to increase this value. Once a market rally gets underway with a FTD the sign posts will be what happens at the 50-day moving average or 200-day moving average. These would be the logical places for a rally to stall, in which case the focus will be on the short side of the market. A brisk move up through these logical resistance areas would cause me to focus on the long side. So we are waiting for Mr. Market to make up his mind.

No shorting list is offered right now. Most short candidates are stretched dangerously to the downside. We need to see a rally push them up into a logical area of resistance and watch how they act before candidates can be identified.