Sunday, June 18, 2017

How Did I Know The Market Was Going To Tumble on  Friday June 9th?

Actually I did not know that.   No one can predict what the market will do on any given day.   There will be some out there that will claim that they can accurately predict the market tops or the market bottoms.   I strictly go with what the data shows on any given day and hold back any of my biases or feelings about the market.   I don't listen to anyone or postulate what causes the market to move in any given direction.   I leave it up to the commentators in the media to comment on that.

I am strictly a  "Growth Stock"  and  "Trending Stock"  investor and a trader.   They tend to outperform the general market by 2 to 2.5 times using   $SPY  as a gauge for the performance of the general market.   There were plenty of warning signals flashing at me when I scrutinized the stock charts of leading stocks and sector etf's at the end of the week on  5/26.   There were certain clues that alerted me to be defensive in my approach to the market.   I was fortunate that it was the labour day weekend and I had one extra day over the week end to analyse the market data.   I will share with you some of the data points that I utilized to have trailing stops - when the market opened on Tuesday May 30th - on 38 leading stocks.   They were revised upwards as the market continued to move higher.   This was a defensive measure on my part to lock in the profits and raise  CASH  immediately.   

My Interpretation of the Data a Week Prior 

My routine every weekend is to look at the performance of the 3 major indexex  -  $DJI, $SPY  and  $QQQ.   I also look at the performance of all the 9 major sectors to identify the leading sector.   The reason why I do this is because I am always looking at the best stock from the leading sector in a leading index.   As a Retail investor, I only want to be involved with the best of the best Growth Stocks.   I don't ever plan on holding that stock for the long term.   I just  "Buy High and Sell Higher".   I harvest profits of  +10%  to  +20%   and move on to the next stock.   It may be the same stock too sometimes in which case I will use trailing stops to continue to build extra profits in that stock.

What got my attention analysing the market trends over the labour day weekend was:

  1.  $QQQ  was the leading index   + 3.78%  since the last distribution day on   5/17
  2.  $XLK   was the leading sector  +3.26%   since the last distribution day on   5/17
  3.  $XLU   a defensive sector was  +3.29%   since the last distribution day on   5/17
  4.  $XLI    dividend paying large cap stocks (not growth stocks) was  +3.37%   since the last distribution day on  5/17
Wait a second!!!   What just happened?   Did I see a dinosaur (institutions) just walk by that left a huge foot print and a pile of doodos for me?   They account for  80%  of the total volume of trades on any given day.   They just left a clue for me that they are rotating out of the leading stocks (Tech Stocks in particular) and parking their money into dividend paying stocks.

Is it any wonder why I adjusted trailing stops on all those 38 winning leading stocks on Tuesday morning?   These are the stocks that were appearing on My Watch List since April 24th when the   "Market was in a Confirmed uptrend".   I had tweeted and suggested trailing stops on Tuesday and tweeted revised ones the next day as well.   I also tweeted that I was completely out of  $QQQ   position on Tuesday to stop the bleeding.   I am glad I did  that, although so many of my readers suggested that I got out too early because it rebounded slightly the next day.   That may have been the   "Dead Cat Bounce"   but fundamentally there has been a lot of technical damage done to the Tech Stocks.   We all have to be very defensive next week.   Have patience and let the market rally for a couple of days before making a major stock buy.   Any position that you do decide to take, make sure it is a very small position to start out with until the stock proves itself that it is worthy of your investments.

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How I Identify Winning Stocks and Out Perform the market by managing the Stock for Entry, Exit and utilizing appropriate Trailing Stops

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Happy Trading!



Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.

The Information I provide is for education and informational purposes only. The Information provided is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information provided is general in nature and is not specific to you or anyone else.