As stocks continued to rally from the run started last week, traders are watching what might derail this upside push.

The stock market has shown resilience the last two months, shrugging off negative news from outside influences such as the Federal Reserve (Fed).

Traders must watch to see if this determination for upside movement continues.

Best stocks to watch highlight trader’s list

The stock market continued a strong rally that started last week in the face of the Fed committing to raising benchmark interest rates by 0.75% at the next meeting Wednesday and Thursday.

The Fed held strong on raising rates, regardless of any positive results that might come from the U.S. Consumer Price Index (CPI) on Tuesday and the U.S. Producer Price Index (PPI) on Wednesday.

Mary Ellen McGonagle, Senior Managing Director of Equities at Simpler Trading, sees the stock market response in light of this Fed stance – four consecutive days of higher gains – as a replay of the first two weeks of August. During that time frame the markets rose despite hawkish comments from the Fed.

She pointed out one difference with corporations reporting earnings in that time frame that

were above estimates which helped boost stocks.

“While current signals point to a continuation rally this next week, the lack of a bullish signal for longer-term upside has us refraining from adding more names to our Suggested Holdings List,” Mary Ellen said.

Trader adapts to positive market moves

The continued uptick has Mary Ellen adapting to the positive market movement.

As mentioned, we’ve broadened our watch list with each of the stocks on the list currently in bullish positions as they are trading above at least short-term resistance with positive momentum indicators,” Mary Ellen said. “In addition, several names are breaking out of bases. We’ll add stocks from this list as warranted over the next week.”

Mary Ellen continually updates these best stocks to adapt to what the market is delivering in terms of price action, support and resistance, and moving averages that fall within her technical chart analysis.

“At this time, we’ve built out the watch list in anticipation of a potential continuation rally,” Mary Ellen said. “The list is composed of fundamentally sound companies with positive charts and the names are sorted by sector.”

Key sectors that Mary Ellen follows include technology, healthcare, semiconductors, consumer discretionary, retail, and energy.

Price action in FAANG stocks is always a priority for Simpler’s traders. FAANG stocks refer to technology companies that include Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet).

“In order for the broader markets to have true lift-off, we’d ideally like to see these names not

only participate, but outperform.” Mary Ellen said.

Is CPI data the lynchpin for a continued rally?

An economic data release this week – CPI numbers – could be the lynchpin supporting any further market upside movement.

“This is an important gauge of inflation and in the event that CPI comes in ahead of estimates and the markets continue to shrug off a (Fed) higher interest rate scenario, we expect a runup toward the 200-day moving average to pick up momentum,” Mary Ellen said. “A break above this moving average would be quite positive for the markets.”