Market Always Has The Final Say
A market this
poor doesn’t come around that often. They hang around this long
even less. The major indices just can’t seem to find anything good to rally
on. After the obvious distribution of the past two weeks, the averages finally
fell subject to yesterday’s overwhelming pressure.
I said it over the past few rallies
and I will say it one more time for anyone who may have missed it: If a rally
fails to produce solid leadership, there will be nothing to take it higher and
it will ultimately fail. In my humble opinion, this market lacks leadership for
the time being. Many stocks and sectors are working their way through
corrections each day and I believe strongly that as soon as tomorrow, or as long
as five years from now, strong leaders will emerge and begin to take us onward
and upward. Just not today.
I have recently been inundated by
emails asking of other ways to make money in the market, i.e., short-selling. Other
emailed questions range from, “How should I be invested right now?” to
“Do you think this strategy has become obsolete?” To these questions
and many others like it, I can simply say that we are undoubtedly in a period of
uncertainty. That is not a bad thing, but simply a factor that needs to be
accounted for in anyone’s financial strategy.
If you have solid goals and know where
you want to go with a well-formulated plan, then a period such as this one can
last for weeks, months or years, and should not have an effect on your goal.
Having said that, I am making an assumption that our goals are not to go out and
find “action” or a need to make money every day. More importantly, we
need to focus on making big money when it is there to be made, and preserving
capital when it needs to be protected. Anyone can contact me, or visit www.truecapitalmanagement.com
with questions on investment plans or portfolio analysis. I
hope you were able to bear with me, because much of what I personally think
through gets put into this column. I am simply stating my own thoughts to bring
the current market into focus. Now that I have my attention on not looking for
action, but signs of a bottom or leadership, I turn my attention to secondary
indicators following my analysis of the market’s price and volume.
The Put/Call ratio was seen at .89
during the trading day today, a positive sign as it moves closer to 1.0. I would
like to see the Bullish/Bearish Investment advisors flip-flop. Currently Bears
are right around 30 and bulls around 50. For now, I wouldn’t take too much
action on any “indicator” other than price and volume, but I would
follow the above two numbers as well as mutual fund cash positions, the ARMS
index, and the spread between new highs and new lows. These numbers do not spur
action, but they do act as a failsafe so that we do not miss something in the
bigger picture. For example, if all of these things are bullish, yet our
previous analysis of price and volume kept us away on a deserted island, it may
be time to return home.
One indicator that I watch but in all
honesty is not too exciting right now, are quality stocks setting up, breaking
out, or failing. Don’t get me wrong, they are out there, but many are some of
the same names I have mentioned in the past few columns. As we watch the market
get hit, it is easier to see its effect on individual issues. For example,
Christopher Banks
(
CHBS |
Quote |
Chart |
News |
PowerRating) has held strong at its 50-day
moving average on several different tests of it. Today, the pressure was
too great (along with heavier volume) the stock failed to maintain its support
and took a solid hit below the line.
Autozone
(
AZO |
Quote |
Chart |
News |
PowerRating) has been as good as could be expected in its attempts to hold and
close above its pivot of 80.10. Today, it also fell to the weight of the market.
We have all heard it before from
people in the gym, or from our neighbors. But my stock
is such a solid company making so much money that I am fine with it in the long
run. In fact, these guys are printing money and their PE is only 6! My oh my,
and yet good ole NVR
(
NVR |
Quote |
Chart |
News |
PowerRating) or whatever
stock fits this scenario gets hit. In NVR’s case, it has amounted to a drop of
almost 20%.
I am only making a point I am sure
everyone, including myself, knows but needs to be reminded of: In
the end, the market always has the final say.
For now, be careful out there and do
not be overwhelmed by the market. It has done this before, and it will do it
again. Just keep in mind that it will also eventually return to producing solid
gains that very few other assets are capable of in the investment world.
Until Thursday,
Â