Friday’s huge rally was fraught with bits of weakness. The ratio of stocks going up to down was just 2:1 on a 2%+ day when it should have been much, much stronger. The ratio of volume in those stocks should have been multiples stronger. New highs to new lows didn’t move much at all. The rally was narrow and underwhelming beneath the surface. As has been the case since summer, the stocks with the heaviest weightings in the cap weighted indices are leading the charge without a lot of support. More often than not, this leads to some short-term weakness, but typically does not spell the end of the rally.
My takeaway is that it’s a good time to stand pat or perhaps even prune some weak positions, but continue to buy weakness until proven otherwise. This looks like yet another mild pullback of a few percent before heading to new highs.
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