Indeed, with the market in a constant overbought situation and with the earnings season starting to push new leaders out, buying new breakouts could be very treacherous. It is better to buy new leaders when they pull back to around their 5MA. This is what back-tests have shown.
My target is at least a pull-back to the zone circled in red in the Table below.
On a side note, I recently received two negative private messages related to the stock selections (I've also received many positive messages):
The first message basically said, "There is no need for the stock selection, as I am staying in cash."
When your main objective is to avoid risk, then staying in cash is THE best way to avoid risk, although in reality cash will eat away at your purchasing power through hidden inflation of key necessities.
My opinion is different: I need to stay invested, because this is the only way to stay alert and ready. It is also the only way I can profit from market moves. That said, it is very important to keep tight money management in place.
The second message was that the 20DMF's short signals are not working well and that therefore it is better to always stay invested on the long side.
This is entirely correct: we can see in the yearly return table show below (the 20DMF EOD version with the Cumulative Ticks) that the 20DMF short signals did not fare well in 2012-2013, nor did Buy signals in 2007-2008. At the end of 2008, in hindsight, we could also have said that only short positions work.
Strict money management rules are crucial. Back-tests have shown that if you buy leading stocks in a pull-back to a level that is lower than the 5MA, you will make money, even if you act against the direction of the general market and even when the 20DMF issues a short signal. The year 2008 furnished an exception to this rule.
Below are a few screen shots related to Monday's potential long positions. I believe AA and STZ are close to issuing a buy signal, whereas the others are probably too far away for now.