Major averages rose on higher volume with both the S&P 500 and Dow Industrials now at record all-time highs. A weekly chart could be viewed as a shake-out and breakout. The NASDAQ Composite at about 3% and the small-cap Russell 2000 at about 4% off their respective all-time highs are not far behind.
While Brexit caused the shake-out, the market has bounced back sharply. Fundamental arguments abound on why the EU's days are numbered, the UK will have some major headwinds with which to contend now that they have voted to leave the EU, and the global economy remains stagnant. Nevertheless, technical action is showing higher prices due to the QE wildcard.
Indeed, asset purchases by central banks have risen to their highest levels since 2013, despite investors bailing out of equity funds. So while investors exit, central banks more than fill in the gaps as US equity markets are at or near new all-time highs.
The Bank of England recently said it plans to lower interest rates another 25 basis points, the European Central Bank pledged further monetary easing to insure no liquidity issues in light of Brexit, and Japanese Prime Minister Shinzo Abe is expected to follow through with additional QE measures.
Nevertheless, the market will continue to have its short, sharp corrections thus it is imperative to remain fluid, quick to take profits whether short or long when a stock gets ahead of itself in either direction, and quick to cut losses. And of course, the odds of a far more serious correction or bear market grow with each passing day. But predicting the future which does not exist is futile and unnecessary as price/volume action in leading stocks and major indices always leave clues on how to best position oneself.
Many of the names we have reported on since April have performed quite well. Among these, Weibo (WB) is up +60.24% since we first identified it as a pocket pivot on 4/6, Silicon Motion (SIMO) is up +55.89% since we first reported it as a pocket pivot on 3/1, Nvidia (NVDA) is up +47.49% since we first report it as a pocket pivot on 4/6.
Other names such as EBIX, FN, ULTA, UFPI, and VMC, for example, have rallied more than 20% since we first reported on them as either pocket pivots or buyable gap-ups. Overall, those stocks we have reported on over the past 3-4 months have shown that it is possible to make money in this market if one's stock selection is sound. For that reason, we do not think investors should lament the "difficult" environment as it still provides opportunities to investors able to find them.