Movers & Shakers

Two weeks ago, following the climactic selling action of January 20, we thought there was a good chance the market could finally bounce for a bit, allowing some stocks to separate from the pack and/ also giving investors some opportunities to trade on the long side, or sell some broken stocks that bounce higher.

And for the most part that’s happened—the major indexes rallied for eight or nine trading days, and many stocks have shown some strength (including this week’s pop in the beaten-down commodity sectors) before running into some trouble during the past few days. So now what?

In the short-term, we don’t see a clear edge.  It would be unusual for the indexes to fall apart less than three weeks after such a panicky low, but then again, 2016 has been nothing if not unusual, and the bounce to this point has been pretty weak—the S&P 500 recouped a maximum of just half its late-December though January 20 decline before instantly meeting with selling, and the Nasdaq didn’t even get that far, and is threatening to reach new closing lows today!

We still think some further upside probing is possible, but the risks are rising. Thus, if you’ve been buying some stocks during the past two weeks, it’s a good idea to tighten stops or book profits. And if you’re still holding some broken stocks, it might be prudent to start trimming.

All that said, 90% of our focus remains on the intermediate- to longer-term picture of the market and individual stocks. And on that front, nothing has really changed—the trends remain clearly down, and thus, our Market Monitor remains in bearish territory and we continue to advise a defensive stance.

Looking ahead, if the major indexes were to ramp higher, we could receive an intermediate-term buy signal within a week or week and a half. Of course, the longer-term trend would remain down at that point, so it still wouldn’t be time to floor the accelerator. We’re just mentioning this as a heads up for what could happen going forward.

Right now, holding lots of cash, doing little buying and patiently waiting for this downtrend to end remains your best bet.

This is an excerpt from Cabot Top Ten Trader, which features the best trades to make every week.  Designed for experienced investors who want even more great growth stock ideas, this advisory recommends the best 10 stocks each month for short-term investment by aggressive growth investors.

Michael Cintolo is Cabot's Vice President of Investments and Chief Analyst of Cabot Growth Investor and Cabot Top Ten Trader. To read customer reviews of Cabot Top Ten Trader, click here. To read reviews of Cabot Growth Investor, click here.

Michael Cintolo can be found on Google Plus.

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