Is It Time To Flip The Switch?

Random Thoughts

The Ps (S&P 500)  began to accelerate to new highs, tacking on well over ½% on the day.

The Quack (Nasdaq) gained just over 1%. This action has it breaking out of its short-term trading range and it puts it within a percent and change of multi-year highs.

The Rusty (IWM) was the most impressive of all. It tacked on over 2%. It’s still over 4% away from all-time highs but that’s not too far, especially if it can put in a couple more big days like Thursday.

As usual, follow through will be key but it sure looks like we are off to a good start.

Aerospace/Defense, The Semis, selected Banks, Financials, Manufacturing, REITS, Transports, and more made new highs with vigor on Thursday.

One of my big concerns recently has been the fact that there were only a few select defensive type areas holding up the market. These areas, namely, Utilities, Energies, & Foods, not only have hung in there but they too are making new highs along with many others.

It looks like the rest of the world is doing pretty good too. The EAFE shares (EFA) gained nearly ¾% to close at 5 year plus highs.

The big question as always is, “is this the all-clear?” Well, it’s never 100% safe to go into the water but it certainly does look like a major positive development. New highs on an expansion of range is a good thing. In fact, I track a moment list of stocks–which I have dubbed my Landry 100–that do just that. To my surprise, many often double or even triple after making new highs.

Trends often go much further and last much longer than most are willing to believe. Thank goodness! Otherwise, trend following would not work.

So Big Dave, you’re starting to sound a little bullish. Is it time to flip the bull/bear switch? Well, I try not to label myself because you can end up painting yourself into a corner. Also, it’s not quite as easy as flipping a switch. Continue to take things one day at a time. A string of good days makes a trend.

So what do we do? You certainly don’t want to get in the market’s way and short it. Unfortunately, unless you’re trading a large basket of stocks like the aforementioned Landry 100, you can’t just buy because we are at new highs. Wait for setups. Because the core methodology requires a pullback, there won’t be many setups until the market does just that. Therefore, get ready to get ready.

Best of luck with your trading today!

Futures are flat pre-market.

Dave