Jan 22 Euro QE Market Update and Stock Scan

Like the expected knee-jerk reaction, stocks rallied on news that the European Central Bank will engage in a Quantitative Easing program similar to that in the United States (three rounds).

With the expected bullish outcome occurring, our job is to go with the money flow as stocks rally while being cautious of any sign of a reversal.

We’ll start our update and stock scan with our S&P 500 level chart:

At this point, it’s just buy the pullbacks and breakouts as traders react in knee-jerk reaction to the “Stimulus = Higher Stock Prices” thesis.

The intraday trend remains higher and money flow is still positive into equities.

We should thus continue to focus on the buy/long side while this situation (trend) continues.

Breadth strongly confirms the rally:

The grid above reflects a strongly positive situation in money flow across sectors.

The weakest sector is the defensive Utilities – then Energy – while all other sectors are strongly positive.

All sectors except Utilities and Energy are near 100% breadth – which means (almost) every single stock in the sector is positive today.

Again, we’ll focus on bullish candidates only.

We have potential bullish trend continuation plays in the following stocks:

Just to select four, Netflix (NFLX), EBAY, Agrium (AGU), and Yum Brands (YUM) (bonus – Dollar Tree DLTR).

Potential downtrending candidates exist in stocks showing relative weakness today:

None.

Do not focus on the short-side of this stimulus-news driven market.  That’s a great way to lose money quickly.

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).