Last week the major U.S. indexes once again closed mixed. The Dow rose 1.1%, the NYSE gained 0.9%, the S&P 500 added 0.8%, and the NASDAQ gave up 0.4%. After Tuesday’s broad selloff on volume, IBD correctly downgraded their outlook to “market in correction”. Then, inexplicably, two days later, after solid gains on lower volume, IBD reinstated the “uptrend under pressure” outlook and brought back the previous distribution count with two distribution days added to the NASDAQ, the only explanation given was “worries that prompted the downgrade in the market outlook diminished”. This call is extremely frustrating and disappointing. IBD is supposed to be a rules based market timing system and here they seem to be just making it up as they go along. Thursday’s action was not a follow through day, as defined by IBD, as it did not come on higher volume and it did not come on day four or later of a rally attempt. Even if it could be considered a follow through day, that would move the outlook to “confirmed uptrend”, not back to “uptrend under pressure”. IBD really needs to provide a plausible, rules based explanation for this call, retract the call, or they’re undermining their credibility. In any case, the IBD outlook call is what it is and the fact remains that the market isn’t in a good place. Personally, I’m treating the market as if it’s still in correction and making investment decisions accordingly. Play defense, raise cash and move to the sidelines, wait for the Shutdown Theater/Debt Ceiling Circus to close, and look for a legitimate follow through day that will signal the start of a true uptrend.
This week neither of the watch list stocks are at or near proper buy points.
/as usual, your mileage may vary, always do your own homework
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