Extremely bearish breadth leads to bounce

Markets have experienced significant distribution in first 2 weeks of new year. Breadth trends have deteriorated and are now reaching extremely negative readings.

As you can see in above breadth tables we have had more selling pressure than buying pressure in last 6 trading days of the new year. The T2108 indicator (% of stocks above 40 day moving average) is at 14.55% indicating 85% of the stocks are below their 40 day MA.

Such extremely negative readings in T2108 historically lead to bounce in the market. Not all bounces indicate bottom , some weak bounces lead to further downside. A bounce accompanied by significant improvement in breadth indicators would be good.

The current market conditions are ideal for getting ready and keeping your buy list ready in case of next bull up leg. When market undergo corrections the focus of anticipation setups should be to find longer term position plays as swings after corrections are larger. Because most stocks are in correction , you are working with very small list so you have lots of time to research things and be ready when turn happens.

Some of the stocks on my anticipation radar currently are:

TUBE LOCO KR ROVI NXRT TSN STMP MPSX FCPT PLNT LOCK RP OME FPRX GKOS GCI STZ ALRM DRI ULTA FIVN HRL FN SPNC DLTR ACOR OLED AGRO MAT AGR

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