The percentage of stocks on the NYSE above their 200-day moving averages has improved to 36.5%, which is positive. On the other hand, a truly healthy market will have more than 50% on top of their long-term averages.
The number of stocks on the NYSE hitting new 52-week lows has dried up to below 40 for almost two weeks, which is healthy. (The new-lows number is more important as a topping indicator, but it's a welcome confirmation of general improvement in market tone.)
What we're really waiting for before we hit the accelerator is to get a new wave of great growth stocks breaking out of sound bases. There have been a few, and we have seen some excellent moves following earnings, with stocks holding their gains.
Our strategy right now hasn't changed. If you have a ton of money still on the sidelines, you should be doing some selective buying. And if your buys make money (up 5% to 10%), you can increase your buying. This will keep you in sync with the market and let it pull you toward heavier investments.
The converse also applies, of course, and if the rally stalls and your stocks don't deliver those gains, you should regroup and rethink. We will keep you apprised of what's happening.
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.