The major averages all moved to higher-highs with the S&P 500 making new five-year highs and the Dow making new all-time highs. The higher volume traded on the NASDAQ Composite combined with a move of at least 1.3%, the current threshold level we are using to measure a follow-through day, now puts the market back into a confirmed uptrend on the sixth day of the rally attempt off the lows of last Tuesday, switching the Market Direction Model into a buy signal.
With the market making higher-highs the short side is off the table. Alexion Pharmaceuticals (ALXN) moved up through the 90 resistance level which we viewed as a tight upside stop, while Apple (AAPL) has found support near the top of a prior base it formed in late 2011. In our view, if the market continues to rally this will likely serve as a short- to intermediate-term level of support, but should the market roll over again the odds of AAPL moving lower increase. Until and unless this rally fails, we consider the short side of the market to present opportunity costs given that the long side will likely be more productive.
Investors seeking to re-enter the market on the long side need only wait for proper buy points to emerge, and we would expect that a successful continuation of the market's rally phase will produce such buy points in leading stocks along the way. Yesterday, proton pump inhibitor prescription company Santaurus (SNTS) issued a buyable gap up on a strong earnings report. Because it is a thinner small-cap stock, caution should be exercised, but the buyable gap-up is actionable using the 14.70 intra-day low of yesterday's gap-up day as a selling guide. SNTS' earnings and sales growth is quite robust, with earnings up 1200% and 167% over the past two quarters. Institutional sponsorship has expanded steadily over the past five quarters, with a peak number of mutual funds owning the stock in the most recently reported period.
Expedia (EXPE) also flashed a pocket pivot buy point yesterday, and while its earnings growth is relatively tepid at 9% in the most recent quarter, we note that strength in the group is confirmed by the action in Trip Advisor (TRIP) and Priceline.com (PCLN)
Members should watch for more real-time alerts as buy points in leading stock emerge and become actionable.