1-3-31 Comments

Jerry said it all in his comments, we are all tired of this market and wish it would set up in a good trend.

My hypothesis has been for quite a while that the top may already be in the charts. IBD has the market pulse in confirmed rally. My sense is that the entire reason to place the market in a confirmed rally was the action of 12/29/2015, which was a follow-through-day-sized event. The very next day, however, reversed the entire move of 12/29 placing in my mind that maybe the IBD market pulse should have reverted to the condition before the follow-through day. The Market School model handled the events well. In the model, 12/29 was a follow-through day that zeroed the distribution count and a 75%-investment recommendation. The next day closed below the lows of the follow-through day giving a sell signal and a reduction to 55% invested. Friday we got two more sell signals by closing below the 50-day and 21-day moving averages. The model now recommends a 100%-cash position. The Market School model is a long-only model, so it is silent on taking short positions. If the market is going to rally the road signs will be: (1) NASDAQ lows move up above the 21-day, (2) NASDAQ close above the 50-day, followed by a move to new highs. I am not holding my breath for a miraculous recovery. The real trouble in my mind was weakness showing up in a historically bullish time, Santa Claus rally. The year ended with a distribution day, a difficult feat given that many investors were already on holiday. I am still long one stock (GOOGL).

I uploaded the watch lists to the High Growth Stocks area. Pilgrims Pride (PPC) has been in a downtrend since December 2014. It has recently risen to the 40-week (200-day) moving average, this might provide a well defined short-taking place.