Three Bullish Areas in a Questionable Market

Over the past few columns, I have been talking about areas of the market to be cautious on. Today I want to look at a few different long ideas that may warrant more research from investors. But first let's get an idea of the overall look of the market to provide a little context.

The momentum in stocks is starting to waiver, and many sectors, stocks and industries have become extended to the upside. When that happens, it often entices investors to jump in for fear of being left out of a major market move.

The problem with this thinking is that, most of the time, when emotion kicks in, it is at exactly the wrong time, and the market soon reverses after you make the decision. After the market rose up to test its overhead resistance last week, it began to sell off on increasing volume. The couple of rally attempts last week were on weak-volume patterns with poor breadth.

When you have gains on lower volume, it means institutions are not supporting the move, and when they begin sell, the downside can come fast and furious. For example, last Thursday there were many more leaders down on sharp volume than up. That is a disturbing divergence on a positive day after a selloff.

When leading stocks in the market start to falter, investors need to take note and take steps to protect their portfolio from more downside action in the market. The recent action in the major indices need to be viewed as classic bear market action and can't be trusted.

As far as playing in this type of environment, investors know that the U.S. dollar has been in a downward slide for quite sometime. However, there are many other currencies that have been pretty strong, especially in commodity based areas of the world.

---

At time of publication, Manning had no positions in the stocks mentioned, although holdings can change at any time.

Mark Manning, AAMS, is an Accredited Asset Management Specialist and Registered Investment Advisor with Butler, Wick & Co., where he specializes in wealth management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Manning appreciates your feedback; click here to send him an email.