The Mid-cap 400 is one of the more important market indexes that we look at. I tend to call them the “Jan Brady” of the major US Averages because they are often ignored in favor of either the Large-Caps or the Small-Caps. They’re stuck in the middle. But companies that fall in this category, with market caps between $2B-$10B can tell us a lot about the direction of US stocks as a group. Based on what we’re seeing, the Mid-Caps are telling us US Stocks should continue to hit new highs as a whole. Let’s break it down:
Since September, we’ve preferred to stay away from Mid-caps (See Sept 14th and Nov 24th). We haven’t seen the point in getting involved after they hit our initial target and some consolidation seemed necessary. Well we’ve now gone nowhere over the past 6 months, which is not necessarily a bad thing. I think the fact that the Mid-Cap 400 has hung out up here digesting gains sideways, rather down through a downside correction is very healthy and a breakout is imminent.
Here is a daily Candlestick chart looking at this consolidation over the past several months. I see higher lows and higher highs with very well-defined overhead supply:
This is a name we want to own above all of this resistance. Above the December highs and there is nothing but blue skies. Our target based on this potential breakout would be up near 285 based on the 161.8% Fibonacci extension of the September/October decline. This represents about 6% of upside from current levels. I think we get a breakout soon and we want to be all over it.
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Tags: $MID $MDY $IJH $IVOO $VO $SCHM $RWK $CZA