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Rally Run Ends - Time To Prune Your Portfolio Holdings

|Includes:BITA, EDU, SFUN, TAL, Vipshop Holdings (VIPS)

Last week was a shortened trading week for stocks with the Martin Luther King Jr holiday on Monday, yet a very significant one for the market as a sharp two-day sell off put an end to the most recent rally run.

When the smoke cleared, the Dow Jones Industrial Average lost -3.52% while slicing its 50 day moving average, and closing well below the psychological 16,000 mark for the first time since it most recently blasted above there on 12/18. That mid-December bullish session was what kick-started the latest buyable uptrend.

The bellwether S&P 500 (-2.63%) also closed well below its 50 DMA, and slightly below its milestone 1,800 level. The New York Stock Exchange Composite Index fell -2.99%, and dropped -1.6% below its 50 DMA. At this point, the Nasdaq Composite (-1.65%) is in the best shape technically, as it is still +1.1% above its 50 DMA, and also remains in an uptrend.

It all started to turn ugly on Thursday morning with some weak manufacturing data out of China, coupled with an U.S. SEC judge's ruling that the Chinese units of the four U.S. accounting firms should be banned for six months from auditing China-based companies which trade in the U.S. The judge found that all four joint ventures had violated terms of the Sarbanes-Oxley Act.

That had an adverse affect on stocks in general, dragging the Dow down over -200 points to a five week low. Of course, all of our five China-based stocks which were once solid winners such as; BITA +76%, EDU +16%, SFUN +48%, VIPS +10%, and XRS +10% shown here with their current portfolio gains, were all negatively impacted.

As far as the market's condition is concerned, we will have to see how next week plays out. Solid support is noted on the charts above. Frankly, I would like to see a continued pull back to those levels, then a bounce which would be a turn around day. That would start the next rally attempt, which if confirmed with a Follow Through Day Rally 4 - 7 days later, would be ideal. If those events were to occur, we would then be back in a new buyable rally run.

As far as individual holdings, as always we will take each on a case-by-case basis, selling only the weakest selections if any violate their respective support levels, which are clearly noted in the PREMIUM STOCK PORTFOLIO table below.


No matter the current status of the market cycle, one should always maintain a watch list of buy candidates. On Thursday afternoon, I added two new stocks to our High-Ranked Leaders Watch List.


This week is slated to be the busiest of weeks thus far for our companies reporting earnings.

You have to watch for the actual numbers announcement or results, and then wait for the dreaded conference call. Number can miss, beat or be in-line. During the call the company will offer forward looking "guidance". If it "warns" or if the CEO so much as sneezes at the wrong time, shares could then sell off.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.