My scans are looking bleaker and bleaker by the day. This is quite a rapid, but unsurprising, deterioration from the April highs. This is the third day in a row that my scans failed to produce anything that is remotely actionable. There are still stocks forming decent consolidation patterns but the overall beauty of the patterns that do exist is thinning out hard. It is not like they were looking that bullish to begin with but now it is just a wasteland of beautiful patterns. This does not bode well for the intermediate time frame.
It is always possible that the market can find a floor following another extreme move–this time to the downside–and rally higher. However, it is going to take another round of consolidation in a lot of leading stocks to get them to form the kind of launching pads that lead to significant price moves. It’s getting very volatile out there and that is making a mess of my scans. If this continues, I am not positive that the market will be able to work itself back to the April highs.
Following today’s session, I am now leaning bearish. The market should have definitely bounced by now and the fact that as I type this that it is selling off even further after-hours is at the point of absurdity. This market is going to need to close green tomorrow or else I am going to be raising stops even further thaN where they already are. There is just too much distribution in this tape on the short-term with a lack of accumulation on the up days to be confident here that our remaining long positions are going to find a floor and rally.
The good news, today, is that there are less than a handful of sell signals on an EOD basis. The bad news is that many stocks are nearing sell signals of their own in my personal holdings. My best guess based on how this market is looking is that we will be raising more cash before we go long any new names any time soon. When I say I can not find good setups, I mean it. They weren’t that great to begin with and now they are just gone. This is a very rapid deescalation of this uptrend off the February lows. It’s kind of impressive, on its own merit.
There are still some safety areas in this market and it is completely in the defensive names like Utility, Food, Small Banks, Aerospace/Defense, and REIT related names. However, most of these stocks are already extended or are a bit choppy here making them suspect to selloffs. It feels like the rotation out of growth names into defensive names on a longer-term time frame is continuing despite the very short-term attempt of the market to move back into growth names. Based on the recent earnings reports I can not say that I am that surprised. They have been absolutely pathetic across the board industry to industry.
We are still operating on BUY signals in the SPX DJIA and RUT. The DJT has switched to NEUTRAL following today’s session and is on the cusp of switching back to a SELL signal. The COMPQ and NDX remain under NEUTRAL signals but are also nearing a switch to a SELL signal. This market is going to have to bounce here, or at least very soon, or else our models are going to be going to moving to NEUTRAL and SELL signals across the board. I have already raised over 50% cash in my accounts and have tight stops remaining on most of my remaining positions so we are already well prepared for this.
It’s too bad more of my holdings could not have acted like CLR. However, it is what it is. I am not going to let my gains turn into losses even if the gains have gone from barely decent to lame. It’s the curse of this methodology in a market that refuses to play along. One day this will change but I continue to get the feeling that it will not until a real reset occurs–20%+ correction that last longer than a few months. There will be winners here and there from my CANSLIM and Perfect Speculator scans but they are sure to be few and far between if the market continues to act like this on the short-term.
Aloha and I will see you in the chat room on Friday.
