No stocks currently qualify for inclusion on the Focus List. The NASDAQ Composite Index meanwhile trudges into new high price ground on weak volume capped off on Friday with a big churn on extremely high volume as a result of Russell Index Rebalancing.
Under the surface, the market remains in a highly bifurcated state where tech/growth names are pushing higher while other areas of the market, including industrials, railroads, homebuilders, metals, machinery, agriculturals, etc. remain weak and only managed weak dead cat bounces after becoming near-term oversold when the S&P 500 Index slashed below its 50-day moving average on heavy volume two Fridays ago. Meanwhile, the surprising rebound to new highs has occurred on light volume until Friday when volume expanded as a result of Russell Index Rebalancing.
The bifurcation in the market is evident when viewed from the perspective of various industry and sector index and ETF charts. Below we show six charts consisting of the Dow Jones Transportation Average ($TRAN), the Airline Index ($XAL), the Computer Technology Index ($SXI), the VanEck Vectors Semiconductor Index (SMH), the SPDR S&P Homebuilders ETF (XHB), and the Financial Select SPDR Fund (XLF). This is a representative sampling of the bifurcation that exists among various market industries and sectors.
We continue to view this market as one that does not necessarily require one's participation if one is an intermediate- to longer-term trend following investor. It is more suited to short-term swing-trading, even day-trading at times, which is not the most favorable environment for making big money, as was discussed in our last live market webinar.
This brings to mind Jesse Livermore's parable about overtrading. A member recently wrote: "I have just joined on a two-week trial basis. I did not receive any news or weekend report and would like to. Or is it because your indication is SELL and there is nothing to report besides the poor state of the market? I have been with IBD for many months and know the work of O'Neil, Minervini, Livermore, etc. and am quite familiar with valuation (McKinsey, Damodaran, etc) but have been losing money by paying too much attention to superficial optimistic views on IBD that don't apply for more than a few days in this turbulent market."
Our response has been that we believe there are times when it is far better to do nothing than to trade. False optimism leads to getting nickeled and dimed which can eventually quarter a trader. Overtrading, as Jesse Livermore one said, costs traders massive sums of money. Meanwhile, the "man in the mountain" he spoke of would only trade the market when the opportunity was clear. He would then press his advantage.
The Market Direction Model (MDM) remains on a CASH signal.