10-9-2013 Comments

IBD put the market in correction after yesterday's action. One look at Jerry's leaders index shows that damage was done to leading stocks. The Market School model has not moved to correction. There were two sell signals produced yesterday bringing the exposure count down to +3 (75% invested). This rally did not begin by a FTD but instead a recognition that the market making higher highs turned the buy switch on as a failsafe mechanism. Any close below the level that turned it on turns the buy switch off (3964.19). We are trading below this level as I write this note. Using Market School procedures, turning off a failsafe buy switch does not automatically produce a zero exposure recommendation. Any further distribution or close below the 50-day will cause further sell rules as many as three if we get distribution today.

Regardless, the action of leading stocks suggests paring down to just your best holdings. I currently hold TSLA and CBI. Other stocks that are holding up well are: EOG, SM, RGR, MCO and RFMD. Energy stocks in general are doing okay.

The market is news driven and news out of Washington could cause a snap back rally. It would be totally okay to just sit this out and go to the beach.