Kevin Lane is one of the founding partners of Fusion Analytics, and is the firm’s director of Quantitative Research. He is the main architect for developing their proprietary stock selection models and trading algorithms. Mr. Lane is a member of the Market Technicians Association.

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After testing the lower end of its’ trading range just a few days back the S&P 500 bounced had bounced back modestly prior to yesterday’s big advance. It was not too much of a surprise that the index bounced from the lower end of the range given it had fallen close to 7.00 % before hitting that level.

As we just mentioned that bounce was modest at best for a few days with marginal sponsorship until yesterday when on the heels of Intel’s (INTC) good earnings news the bounce gained some its mojo back with bulls showing they still have some juice (ie. buying power) left. What gave us comfort in the advance was not as much the point gain but rather the internal skew which had up volume besting down volume by a ratio for 27.3 to 1 on the NYSE while decliners swamped advancers by an 8.9 to 1 margin. The NASDAQ was almost as impressive with 18.4 to 1 and 4.9 to 1 ratios respectively.

AS WE ALWAYS SAY IT’S NOT THE POINT GAIN THAT MATTERS BUT RATHER THE SPONSORSHIP BEHIND THE MOVE AND THE INTERNALS BEHIND YESTERDAY’S WERE CERTAINLY AKIN TO GOING INTO BATTLE WITH A FULLY LOADED BATTALION.

AS EVEN SIMPLE MILITARY STRATEGY WOULD SUGGEST YOU HAVE A BETTER CHANCE OF ADVANCING WHEN YOU ARE FULLY ARMED. THUS THE LIKELIHOOD OF SOME FOLLOW THROUGH (AFTER SOME SHALLOW PULLBACK/CONSOLIDATION) AFTER YESTERDAY’S STRONG SPONSORED MOVE HAS GROWN EXPONENTIALLY.

Tech as we have said from the beginning of this advance remains the place to be. This is no more evident that simply looking at the year to date returns for the three major averages which show the DOW down 1.83 % the S&P 500 up 3.26 % and the NASDAQ up a WHOPPING 18.13 % !!

On pullbacks allocating into a basket of high ranked FusionIQ tech stocks and riding what appears to be the start of a summer rally seems like a good strategy. As always never buy blindly and always make sure you have an exit strategy in place in the event the market throws a curve ball.

Category: Markets, Think Tank, Trading

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One Response to “The Bulls still have some juice …”

  1. leftback says:

    Getting longer at SPX 870 was a great call. We bought energy but closed the trade already. Being long tech over the summer worked extremely well last year, and the NAZ has outperformed again. Another good call. Watch out for the later stages of the earnings season, though, there is a lot of retail in the NAZ, and there will be some pain, no?