Bucking The Trend

I see no real changes since my last report. The markets continue to act well -- even at these levels. Volume patterns remain in good shape and many stocks and sectors are coming up their right sides -- but the rally has lasted eight weeks.

That's the most important point I want to make. This doesn't mean the market doesn't go higher. But there are some short-term negatives to know about.

First off, in my view, all major indices are now in the midst of strong longer-term resistance. This may impede strong gains from here. Secondly, New Highs are still not expanding...even after the move. It's also a potential problem that some short-term indicators are flashing warning signs. The VIX and VXN have both dropped sharply indicating possible complacency and bullish/bearish numbers are starting to get a little too bullish.

Nevertheless, I expect any pullback to be controlled as the technical condition has improved. It also doesn't hurt that historically this week has been seasonally strong. The last point I want to make is that the best gains have continued to come from stocks "off the bottom." In the past week, several Telecom companies broke above their first points of resistance. Many others preceded them.

IF buying off the lows is your game, you have a field day right now. Just remember, this has happened many times over the past year -- only to fail bottom-feeders miserably. This is why I constantly look for strength.

Most sectors are still looking in poor technical shape to me, because of massive overhead resistance. 

One group bucking this is the Restaurants. A few have pretty good charts.

Panera Bread Co (PNRA | Quote | Chart | News | PowerRating) broke out at $44 and has continued to be strong.

Krispy Kreme Doughnuts (KKD | Quote | Chart | News | PowerRating) has been forming nicely. I like the chocolate creme-filled.

Outback Steakhouse (OSI | Quote | Chart | News | PowerRating) has been starting to shape up with insider buying near the high.

Applebee's International (APPB | Quote | Chart | News | PowerRating) tried to break out Friday but still looked good.

Darden Restaurants (DRI | Quote | Chart | News | PowerRating) has been on pullback mode. Needs a break above $32.50.

No matter what -- close stops on everything. This remains a very tricky market, with vicious rotation.