MLR - PMP 7/18/14

Published : July 18 2014 at 8:54 ET

Major averages fell yesterday on higher volume on both NASDAQ Composite and S&P 500 as leading stocks got hit hard once again. Yesterday's shooting down of the Malaysian airliner and global tensions in Ukraine and Israel underscore the fragility of the current market environment. Meanwhile, futures are rebounding somewhat this morning, although this is far from an "all clear" sign, and investors should likely seek to keep their powder dry.

Leading stock patterns are broken so some healing time is required. The action of leading stocks in 2013 and 2014 has proven that buying pocket pivots in the base as the market starts to turn and then selling into obvious breakouts has been a very effective strategy. Pocket pivots are therefore a powerful weapon, especially in this QE-riddled environment, and investors should remain on the lookout for such buy signals as the market recovers and regains its feet after any correction, whether minor or major. Those who fail to recognize the effectiveness of pocket pivots will simply remain in the stone ages and continue to be battered by the overly simplistic and obvious method of only buying base breakouts.

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