Lighter Than Air
There is not
a whole lot going on out in the market. Volume is so light that
either everyone is enjoying the tropics — or no one is able to come up with a
solid bet to put money to work or pull it off the table.
While the market continues to go
through a time of boring, flat base action, very few stocks are tempting to buy
unless an investor is just looking for action. One of the best candidates I have
recently seen is a perfect example of this: Corinthian Colleges
(
COCO |
Quote |
Chart |
News |
PowerRating)
tried to break out on August 2.Â
Although the move came on volume that was over
300% above average, the stock came right back down the next two days. When an
environment is conducive for investment, stocks breaking out will show nice
follow-through on the initial move. Since the exact opposite is occurring, we
have a signal that this is the time to earn a little interest and protect the 2
c’s: Capital and Confidence.
The period we are in right now is just
a part of the job of investing. Jesse Livermore once said: “It never is
your thinking that makes big money, it’s the sitting.” This idea does not
only apply to holding onto a stock, but also during times of sitting in cash.
This will eventually end when our economy and stock market move ahead from the
consolidation, but may take a while.
It will be important to keep an eye on
the major averages’ price-and-volume action for early signs that institutions
are ready to get in. It will also be important to watch for strong companies
with stellar financial performance to push their way to new highs. When these
two signs exist, it will be time to deploy the much-valued cash that we have
been hanging onto!
Thank you all for your wonderful
questions and comments. I will continue to respond and address various issues in
upcoming columns.
Until Thursday,