Watch For Plurality On A Micro Basis For Investing Clues
The
markets leave clues.
verdict of the markets is one of the most important skills of a top investor.
What groups should an investor concentrate on for the long
portion of his portfolio? One of the
best ways to determine this is to read the plurality of the markets’
action. What groups are dominating the
new high lists? Are there any groups
that are growing in number on the new high list that are showing stocks
breaking out of four-week consolidations with consistent regularity each day or
several times a week? These are the
groups to focus on in your long portfolio.Â
When a group broadens the number of issues that are making
new highs the market is giving a strong indication that this trend is for real
and is likely to continue. Particularly
when the new highs are breakouts of four-plus week consolidations this adds technical
credence and reliability to continuation of the trend.
selling at a discount to their growth rate or expected growth rate (PE 70% or
less of their earnings growth for the last two quarters and five-year growth rate
unless the stock is a turnaround situation), this means there is plenty of room
for appreciation without price getting in the way. It is also
important to understand why a particular group is likely to continue to
experience strong earnings growth in the future.
Currently one of the few groups that meets all of these
criteria are regional banks. They are
breaking out of sound bases, dominate the new high list, particularly our own
Top RS/Top EPS new highs lists. Regional banks are often selling at a PE discount to their growth rates
and are growing in institutional sponsorship without being dominated by
institutions. Regional banks are
benefiting from a very wide yield curve that is likely to remain in force as
long as the Fed remains on hold from tightening policy.
growth in the economy, the Fed is likely to remain on hold for many months.
The same scenario holds for finding the top groups to
short. Look for groups that are making
a large and growing percentage of the daily new lows lists.The best groups are showing stocks breaking
down out of four-plus week corrections or consolidations many times each week.
overpriced when comparing their PEs to their growth and expected growth rates?
in any of these groups consistently as they make new lows?
likely to remain weak or decelerating in this group.
Currently Telecoms, techs, media, semiconductors, and
utilities seem to meet most or all these criteria and they are dominating the
new low lists. These then are the
groups that should be watched carefully for shorting opportunities.
has been dominating the new low lists for over a year.
begins to consistently lesson, and bases begin forming in most of these issues,
that will be the time to begin to tighten up stops and look to a more
consistently dominant new low group to rotate into.One of the most important rules an investor should learn is
to not fight the tape and to let the market be your guide, particularly when it
is giving a strong and consistent message. A group which dominates the new high or new low list, has valuation that
will allow it to continue moving in the direction of this trend for some time,
is being accumulated or distributed by institutions, and is breaking out of
valid technical patterns in abundance is giving strong clues that the trend
being seen is likely to continue. It is
not where the markets move, but how they move and what messages they are
giving that investors should spend most of their time focusing on.
Whether we are near a market bottom or preparing for a new
leg down is not as important to investors as knowing which groups are giving
clear indications of further potential movement on the long or short side for a
long/short investor. Paying close
attention to reading the plurality of the market can yield much higher profits
than focusing on where the main indexes are going.
Here To Learn How Mark Boucher Has Been Successful For The Past Decade