Let’s Talk Discipline
I thought
there was a good chance that the markets would take a turn one way or
the other, and that’s exactly what happened. The last
paragraph of my last report indicated I thought there would be near-term
weakness. It has been a rough few days. Earnings blow-ups, spiking oil prices
and escalated fighting in the Middle East gave impetus to the move down. Instead
of talking major indices, I wanted to just talk discipline. That does not mean
you don’t watch support levels in the major indices.
- Breakouts have become few and far
between. That means you do nothing on the long side until they show up. - There still remains a lot of
good-looking charts but that number has been decreasing. As I have
stated…several sectors appeared to have topped. Most of these good-looking
charts had already moved out…so nothing to do. - While the Nasdaq and specifically
the Nasdaq 100 are acting suspect, the SEMICONDUCTOR
group continues to have many constructive charts. - More and more stocks are getting
hit hard and then wedging up. This type of pattern is quite worrisome. The
more and more names that look like this, the more worried I will get about
the market. If I start to see these patterns in the major indices…look
out. - Most CYCLICALS
are done. You know my thoughts. CYCLICALS,
every now and then, get going and then poop out.
All this leads me to tell you to do
less and less. I know for some of you, you are addicted and must do something
every day. I am addicted to this but I have learned that there are some times
you take a vacation. I just believe it could be vacation time.
The percentage of bullish advisors
spiked up to 54.6% this week…while the market is dropping. This crowd is the
wrong-way crowd and worries the heck out of me that they are so bullish. Pay
attention.
All in all, the markets are getting
oversold near-term…so I expect a bounce. I am just not so sure there can be
much upside. The bottom line is that this market is going to remain tough…so
go slow. The good news: Baseball season is here.
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