Still Working Out The Details
It has now
been over two years since the averages hit their highs. We have had a
few opportunities to make a buck in that time, but we have also seen some pretty
destructive action as well. The worst part about it is the sitting and waiting
while the market consolidates for another move one way or another.Â
After two-plus years consisting of long sitting-and-waiting periods, you think you would get
used to it…but NO! Today is just as boring as it was in April
2000. What
draws even more patience is the fact that since our overwhelming evidence of
distribution rolled in a couple of weeks ago, there have not been very many
secondary indicators to give us clues as to when things may get back on track,
or if we’re looking at an impending hit in the near future.
I almost jumped out of my chair when I
saw the bullish advisors had dropped from 53 to 48.9 and bearish advisors had
moved up from 29 to 31.3! I guess it’s a start, though. The Put/Call ratio is
acting fairly decent as well. It has been inching higher throughout the recent
decline. Another solid indicator I usually look at is the breadth of new 52-week
highs vs. new 52-week lows. As of yesterday’s close, it stood at 114
highs vs. 124 lows. In the past, when I start to see this pick up on the low
side, it indicates that more and more stocks are probably selling off into a
climax and about to form a bottom. We’ll have to see if this number can pick
up over the next few trading days or weeks.
In the meanwhile, there have not been
too many stocks breaking out of any type of base. Anthem
(
ATH |
Quote |
Chart |
News |
PowerRating) is one rare
example, but also brings a lesson with it. It formed what may have looked like a
cup-and-handle base, but it was only four-and-a-half weeks in length. This short base would
have had a pivot of 71.72 if it were not too short in length. Coupled with the
overall market weakness, these are just too many factors to ignore.
Another inquiry I have received
regards the Gold stocks. This group has been outperforming just about the entire
market. Some of the group’s leaders have done very well over the past several
months. Several stocks come to mind as I look at this group: Glamis Gold
(
GLG |
Quote |
Chart |
News |
PowerRating),
Gold Fields
(
GFI |
Quote |
Chart |
News |
PowerRating), Harmony Gold (HGMCY) and
Royal Gold
(
RGLD |
Quote |
Chart |
News |
PowerRating).
I have been asked about my thoughts on
trading these phenomenal performers. My reply has been the same as with any
stock or group. I am always insisting on all of the ingredients being there
before I will make a move. These include flawless technicals and fundamentals on
the company. Many of these stocks lacked earnings or earnings growth rates. They
were unable to show strong return on equity (until the price of gold started
climbing) and some of them are very low-priced stocks subject to volatility.Â
The final factor I insist on being present is a favorable stock market that is
under accumulation. I admit that these stocks are in play right now, but guess
why? Gold is in play just as it always is, when there are global political and
economic uncertainties similar to what we are facing today. In conclusion, I
present those inquiring about gold stocks with a question: Why not just trade
gold instead of these stocks?
In the meanwhile, the major averages
continue to work out the details. When they have finished, they will let us know
by flashing some evidence of accumulation. Over the next few days, I intend to
do some thorough scans into some setups that may be lurking out there. Even
though the market isn’t there, I will look to share my findings through my
daily trading service and a few in my upcoming column next week.
Have a great weekend,
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