DVA DaVita Inc

Zacks highlights commentary from People and Picks Member «TickerBandit».

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There is more to the present rally ....

.... but are we through the woods?  The answer ... i think is both yes and no  :-) .   A number of key metrics point to the likelihood of a retest of the early october low.  One of these metrics is volatility ...  while another is the lack of double 9 to 1's on this rally ... another which is not unrelated to the prior ... is the lack of participation of smaller cap issues.  For example, fully 30% of the Russell 2000 is trading in the lower 25% of their respective yearly ranges and 9% in the the lower 10%.  Presently there are two issues trading in the lower 25% of its yearly range for every issue trading in the upper 25% ... for the largest 3000 publicly traded companies.   I could name a few more broad market metrics  ... but in essence ... it would only be more of the same ...

OK.  So the present situation is that it is sprinkling while the sun is shining.  Near term, the metrics support continuation of the present rally.  Divergence which was present in the first week of August has since dissipated and the extent to which it occurred did not breech the Bear Market threshold.  It continues to decline and is presently forecasting the long-term average market returns over the next 6 months.  A shorter term indicator of the same metric is indicating above average returns over the next twenty days. :-)  ... that said, I think a good portion of the gains are already in ... with the remainder ... bumpier and with more modest gains.

The bright spot is Large caps which is consistent with the forecast of continuation of bull market (new 52 week highs for the indices). So the present forecast is mostly sunny with good chance of rain by mid-November.  Not the kind of rain which destroys the crop, but the kind that nurtures the crop and provides opportunity.

But naturally, I am going to be following the market's progress.  What I don't want to see happening is an early weakening/reversal of small cap issues.  There remains a small probablity that bear market thresholds in divergence could be present when this present rally rolls.  If there is, the subsequent selling would probably be harsh.   The good news is that the evidence presently supports very low likelihood that Bear Market thresholds will be met.  On the other hand, there is also the possiblity that short term metrics remain strong and no retest occurs.

Happy Trading, TB  (Oh and Uhm ....  I told you so)

The most recent picks by «TickerBandit» are:
A buy rating on Lexmark International (LXK),
a buy rating on DaVita (DVA) and
a buy rating on SanDisk (SNDK).

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