When it comes to overall market health, it doesn't make sense arguing with the trend of the major averages, which is upward for now.
Good news for the bulls is that higher-volume declines in the indices remain well contained. Institutional selling has been virtually non-existent. There are also a decent number of technical setups in individual growth names that bear watching. In addition, the Nasdaq Composite showed a bullish accumulation day on Tuesday, gapping up 1.2% in strong volume. It was significant action as the tech index re-claimed its 50-day simple moving average (SMA).
But it still doesn't strike me as a market that's under meaningful accumulation. That's why it's tough to be long with conviction and tough to be short with conviction. Most of the Nasdaq Composite's gains since mid-November have come in average or below-average volume. It makes for a shaky foundation, which means it wouldn't be hard for sellers to gain the upper hand if headline flow starts to turn negative.
The market has served up a few technical breakouts lately from the likes of Celgene (CELG), Salesforce.com (CRM) and Neustar (NSR), but outside of that there hasn't been much. Meanwhile, names like Rackspace Hosting (RAX), Fortune Brands Home & Security (FBHS), Sirona Dental Systems (SIRO) and Cigna (CI) haven't broken out yet, but continue to show bullish technical action.
I've been nibbling selectively, but not making any big bets with my Ultimate Growth Stocks model portfolio. The portfolio is still lightly invested with three long positions and two short positions. I took profits yesterday in Commvault Systems (CVLT) and HDFC Bank (HDB). Neither was flashing blatant sell signals, but it's still a trader's market where gains in newly-opened positions can disappear quickly. There's nothing wrong with taking quick profits if you get them, especially during the time now where uncertainty is elevated and sellers can gain control quickly.
