Mike
03-23-2014, 06:42 PM
On 3/11 a stock I owned (TSLA) violated the 10-day moving average after rising above it for more than 7 weeks. This is a sell signal for me. So unless TSLA regains the 10-day where I would be faced with a decision, I have taken profit. I remain in all of my other growth stock positions: FB, KS and PCLN. In terms of a sector play on the possibility that gold has bottomed I remain in AEM, SLW and GDXJ. I took a new possible drilling sector play in DRQ. Unless I am proved wrong these sector plays are for time horizons of a year or more.
As I prepare a new watch list I see many former leaders cracking below the 50-day moving average such as JAZZ, LEN, SFUN, YELP, SCTY, AWAY, GILD, PCYC, PRLB, CELG, DDD, SSYS, and QCOR. I find this ominous and Mr. Market may be setting up for a long term top in which case my long term plays above may get squeezed by forced liquidation at some point. This is all okay with me. Bill O'Neil said once "Our goal is not to always be right but to make big money when you are right." So I if I am right I am setting up to make money, otherwise I will back away if proved wrong and try again when conditions change.
We have arrived at the possible major top question before and so far each time the answer was no. The federal reserve has arranged it such that there is virtually no other place to achieve yield than the stock market. No wonder this top is stubborn. Even if we go into a downturn this yield fact will remain with us for a while. My guess is that what we will see is a great rotation into defensive names and away from glamor stocks if the top is in. The stocks shown above are glamor names. Jerry's leaders index has been suggesting caution also.
However there are still some glamor names setting up such as: KORS, CLR, FANG, WYNN, PANW, PCLN, DAL, WWWW, and ARRS. If these and some of the extended names start failing versus breaking out it will be time to get much more defensive. One of the things I look at coincident with major market tops is NASDAQ average true range. I monitor 20-day ATR measured as a percent of index close. I don't have an absolute level where I am ready to pull the plug but the signature I look for is a trending set of higher highs and higher lows in ATR%. Since 12/31/2013 we have been doing just this but may be just getting started. Bear markets are volatile and are marked by high ATR%. Ongoing bull markets are usually marked by calm and decreasing ATR%. A major market top will have major rotation and this can lead to a stair stepping upward ATR% while the market is advancing or rounding off and this signature can be visible for months prior to an actual top.
As I prepare a new watch list I see many former leaders cracking below the 50-day moving average such as JAZZ, LEN, SFUN, YELP, SCTY, AWAY, GILD, PCYC, PRLB, CELG, DDD, SSYS, and QCOR. I find this ominous and Mr. Market may be setting up for a long term top in which case my long term plays above may get squeezed by forced liquidation at some point. This is all okay with me. Bill O'Neil said once "Our goal is not to always be right but to make big money when you are right." So I if I am right I am setting up to make money, otherwise I will back away if proved wrong and try again when conditions change.
We have arrived at the possible major top question before and so far each time the answer was no. The federal reserve has arranged it such that there is virtually no other place to achieve yield than the stock market. No wonder this top is stubborn. Even if we go into a downturn this yield fact will remain with us for a while. My guess is that what we will see is a great rotation into defensive names and away from glamor stocks if the top is in. The stocks shown above are glamor names. Jerry's leaders index has been suggesting caution also.
However there are still some glamor names setting up such as: KORS, CLR, FANG, WYNN, PANW, PCLN, DAL, WWWW, and ARRS. If these and some of the extended names start failing versus breaking out it will be time to get much more defensive. One of the things I look at coincident with major market tops is NASDAQ average true range. I monitor 20-day ATR measured as a percent of index close. I don't have an absolute level where I am ready to pull the plug but the signature I look for is a trending set of higher highs and higher lows in ATR%. Since 12/31/2013 we have been doing just this but may be just getting started. Bear markets are volatile and are marked by high ATR%. Ongoing bull markets are usually marked by calm and decreasing ATR%. A major market top will have major rotation and this can lead to a stair stepping upward ATR% while the market is advancing or rounding off and this signature can be visible for months prior to an actual top.