D-E-A-D
The rally is
dead. This morning, the S&P 500, the Nasdaq and the Dow all took
out the lows that were set at the beginning of the rally on August 22.
Even though the market is not in buy
mode, I have to admit that it does feel great to be entirely in cash, when I see
the Dow down over 180 points as I write this, and the Nasdaq down over 60
points. It is almost like a consolation prize until the market rewards investor
patience with the real prize which will inevitably come: Bountiful
Profits!
The latest rally brought forth several
stocks that broke out. Two of these three fit the fundamental qualifications I
like to see. The first was Resmed
(
RMD |
Quote |
Chart |
News |
PowerRating), but the market weakness took over
that one and it has subsequently broken down.
Frontier Oil
(
FTO |
Quote |
Chart |
News |
PowerRating) is the second
stock. Frontier broke out yesterday with volume 250% above average. If it
weren’t for the market, this stock might actually keep going up! These two stocks, along with
Respironics
(
RESP |
Quote |
Chart |
News |
PowerRating), are the perfect examples of why it costs money to fight
the market.
Having said that, what is the next
step we should consider before stepping in? Start counting rally days all over
again. After an index closes up on the day, we need to see a gain of 2% on
increasing volume from the previous day, four to seven days after the first
rally day…simple as that.
If this latest rally caught anyone off
guard and cost anyone money…use it as a chance to learn from the mistake. If
you were able to stay in cash, make sure you understand why you chose not to
invest, so that you will be able to do it again in the future. Gary
Kaltbaum’s column yesterday pointed to a good suggestion in taking time to
study past mistakes and successes. This is
how we all get to be better traders and that means making more money when the
time comes.
On the lighter side…I got an email
from a colleague this morning that I thought was a riot, so I figured I’d pass
it along to you (although not to be confused as my endorsement for the company
since I have not used them):
1. Call Deutsche Bank/National
Discount Brokers at 1-800-888-3999.
2. Listen to ALL of the options. (It only takes a moment.)
3. After hearing the seventh option, press 7 and listen. (Every company
should have an option 7!)
Have a great Labor Day weekend.