Melt Up Market Update and Diverse Stock Scan May 18

The market was at risk for a “Melt Up” or “Collapse Higher” today and heated up toward a Melt Up Breakout.

Let’s take a look at the current picture and plan the next step:

Here’s a snippet from Friday evening’s Premium Member Strategy Report that forecast today’s rally:

“Join the money flow and short-squeeze if the alternate thesis develops which is that the market ignores every shred of bearish evidence and bears become buyers on a short-squeeze bullish impulse break-away above 2,120.”

Don’t miss out on unbiased, actionable analysis (and stock scans!) like this each evening – join the Afraid to Trade Membership today.

While it was logical and expected that the market into resistance with divergences would indeed retrace lower, the alternate “be ready for a bigger move in the opposite direction” thesis triggered today.

With that developed the breakout and – just as forecast – “short-squeeze bullish impulse break-away above 2,120.”

This created a Trend Day environment today where BEARS were helping Bulls push price higher via their collective stop-losses.  Frustration helped propel the stock market higher.

We’re reminded how essential it is to plan a dominant/logical thesis but also an equally planned Alternate thesis so that you’re not trapped losing money a surprise event.

Not only do you preserve capital, you’re able to profit efficiently from it – joining the bigger price movement that often comes from an “unexpected” (to the majority) outcome.

That’s precisely what we do each night for you in the membership.

Let’s see what our Breadth Chart reveals about current market strength (or weakness):

As I highlighted in this morning’s post, Breadth was NOT very strong in the morning session.

And as the market experience a short-squeeze melt-up to all-time highs, Breadth is STILL not super strong.

Two sectors – Materials and Energy – are near the 30% Breadth line while the strongest sectors today (four of them) hover near the 80% Breadth level.

It would suggest that market participants aren’t all that excited about this rally and are begrudgingly accepting it – if they truly believed it, they would be committing far more capital into the stock market than the market internals and breadth charts are revealing.

Nevertheless, as I also declared emphatically this morning:  “Price is king.”

You’d want to trade stocks showing relative strength, like our top stocks today:

Rent-A-Center (RCII), Exact Sciences (EXAS), Jabil Circuit (JBL), and Johnson & Johnson (JNJ)

Bearish downtrending candidates include the following stocks from our “weakness” scan:

BHP Billiton, Endo Int’l (ENDP), Baxter Int’l (BAX), and Splunk (SPLK)

Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

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).