Are you part of the recovery?

If you’re a market follower you know that the recovery is slowly under way. We know it’s underway because the market, DOW, SP500 and NDX are trickling up. We have crossed some important resistance numbers and the market is holding, then bleeding up. DOW 12,000 and SP500 1300 were psychological numbers that have been breeched. Dips are being bought and investors instead of wondering when the pull back will be are now beginning to wonder why they are not in because they don’t want to miss an equities increase. The risk trade is picking up steam.

So how do we pick sectors or stocks to get interested in this market so we don’t miss out? Well we head to the charts and find out what is at support or trickling up. We need to start at the top and work backwards. We know the market is trickling up because looking at the DOW, SP500, NASDAQ, QQQQ and SPY. They all are moving from left to right in an upward trend. They are all, on each and every brief pull back bouncing directly off the 20 or 40 DMA. This is how we know that pull backs are being bought and the up trend is in tack. We also need to look at Volume, which has been average to above average. Volume is probably the most important indicator and predictor of buyers. Big institutional buyers will keep volume up, they are smart not to tip the scale though they buy in very average conservative amounts “stealth amounts” not to tip their hands.

We also need to know what early recovery sectors are doing. Early recovery sectors are banks and transports. Let’s go to the charts! XLF and IYT are the Banking and Transport ETF’s. Looking at them we find that the XLF is in a nice up trend and that the IYT the transport sector is sitting at important support. Well, we need both for recovery. We need transports because the transports are product movers. We also need to think inside the transports what would be the most important transport, first tell of the moving of products? Rails! Rail move the products first and then the trucking sector. Everything trickles down!

We know the Banking sector is in an uptrend currently so we now need to determine what will the Transport sector will do. Looking at the Rails CSX, UNP and KSU are 3 good companies to follow. CSX is in an uptrend, UNP and KSU are sitting at support. UNP and KSU are both great companies that may start to move up based on our thesis that the recovery is underway. These companies are sitting at their 20 or 40 DMA will begin to bounce and move up if the recovery is underway.

Inside the XLF some good candidates are MS, JPM, BAC, C and GS. Some are doing better than others looking at their technical charts. Why banks? Banks lend money and invest it. Without banks business can’t get money to expand and hire.