Sky  Hasn't  Fallen

Last week I was getting a lot of comments and messages from my followers looking for direction with their stocks and portfolio.  $SPY was heading towards the 400 day sma - something that hasn't happened since June of 2016.  It felt like we were going to see the repeat performance of the market crash of the dot com bubble of the year 2000 when the $SPY lost  51%  or what transpired during the 2008 financial crisis when the $SPY lost  58%.  There has been a lot of panic selling in the last 2 weeks as if the  "Sky Was Falling".  I repeatedly looked outside my window and all I saw was beautiful blue clear skies, gorgeous sunshine and cool crisp air with perfect calmness.  It than dawned on me.  It was I who was calm and clear thinking and at ease.  I had already started migrating to  CASH  a day before the IBD(Investors Business Daily) called  'Market in Correction'

It's been brutal to see all the 3 major indexes - $DJI, $SPY and $QQQ free falling and breaking down the last line of defense at the 200 day sma(simple moving average).  Institutions normally look at the 50 day sma as their initial level of support but they abandoned that line 3 weeks ago.  There was very little reason for the retail investors to remain in the market and defensive action of preserving the capital had to be the priority.  This has been my consistent message for the past several years with all my blog posts and tweets.  IBD changed the market pulse to  'Market in Correction'  on Wednesday Oct 10th.  Retail investors should have started migrating to  CASH  with appropriate trailing stops at least 5 days earlier to preserve the capital.

FEAR

"The Oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is the fear of the unknown"

By H.P. Lovecraft (writer)

Its best not to listen to any  'GURUS'  in the media and instead look at the data to arrive at any decision you make in the market.  We all know of the October 1987 market crash when the market dropped  22%  in one day.  Inspite of that fatal day in the market, looking over the data I find that we were in a 16 year bullish trend from  1984  to  2000.  $SPY had gained almost  +900%  in that time frame.  There was a lot of volatility and market correction along the way.  As a retail investor, its best to get out of the market gradually when the market accumulates a lot of distribution days.  Trading the stock market, one has to mitigate risk.  One can always get back in the market when the conditions improve.

We have gone through a  10%  correction twice this year.  One was in late January/early February and the second one was in mid March/early April.  Currently, We have gone through a  9%  correction with the  $SPY  in the month of October so far.  The only major difference this time around is that the  $SPY is at the 400 day sma.  The last time this happened was in June of 2016.  Lot of institutional selling currently is fear based because of recency bias of the memories of the year 2000 and 2008 market crashes.  Selling has been furious this time around and it took a shorter time frame for the  $SPY  to plummet down to the 400 day sma.  Looking over the data we find that the  $SPY skyrocketed  9%  within 2 weeks from the June 2016 lows.  We ought to be open to the possibility of a very similar move when the market begins to rally.  

Do You Have Your Stock Watch List Ready ?   

Performance  of  My  15  Stocks 

Currently I am taking the data of the market day by day as we head into a new week and the last 3 days of October.  We need for the institutional selling to cease and have them redeploy their harvested profits back into the Growth Stocks.  There has been a lot of technical damage done to the stocks across all sectors right now.  When the market goes back into a rally mode and we get a 'Confirmed Uptrend',  it's quite possible that we may have a new leadership of stocks emerging.  This is the week when every retail trader ought to be scouring stocks that have withstood this carnage and exhibiting leadership qualities.  I had published a list of 15 stocks in my blog post on October 14th.  These were the stocks that were trading above the 20 day sma at that time.  They are all above the 100 day sma currently and most of them are above the 50 day sma while the  $SPY  is at the 400 day sma.  This is an indication of institutional support for these stocks during this correction.  

When market goes into correction, you can expect  75%  of the stocks  to follow the general down trend. Its always a good idea to check the performance of the Growth Stocks on your watch list against the leading Growth Stock index $QQQ.  Here are the comparison results since Oct 14th when I published this list:

$QQQ            ... - 4.40%

My 15 Stocks ... -3%

My stocks outperformed the general market as well as the leading Growth Stock Index  $QQQ.  While the general market as exhibited by  $SPY  is at the dangerous 400 day sma, my stocks are holding up well above the 100 day sma (some are closer to the 50 day sma) with this carnage in the market.  These are the kinds of stocks one ought to have on their watch list at this time.

Mentoring  Service

It took us 9 months to attain a gain of  +19.52%  in the leading Growth Stock index $QQQ.  In the last 3 weeks, 10.5% of that gain was just given back to the market.  That's something no retail investors should ever have to give up.  Learn to identify:

• Right type of Growth Stocks in current environment.
• Timing the right time to enter the market.  
• Developing a Trade Plan for every stock position.
• Having appropriate trailing stops to mitigate risk.

Schedule a 30 minutes of  FREE  "Discovery Call"  with us.  I will try to get you on board if you are committed to learning our system to Out Perform the Market.  The next 3 quarters historically - mid term presidential cycle year - tends to be some of the best quarters going back to year 1950.  Don't procrastinate and miss out on an opportunity to learn from me.

Happy Trading!

Amin

CASH  is  a  Position  Too

Is this market ruining your day?  Are you getting down on yourself with what the market is doing right now? 

Don't think this is the same scenarios as the 1987 October market crash when the DOW dropped down by  - 22%  on that infamous Monday Oct 19th.  I still remember that week because my portfolio eroded by  -40%  by the end of that week.  First order of business for me that week was to take the total control of my retirement portfolio and fire those so called  "Smart Money". 

There were plenty of signals a month before the market crashed in Oct 1987 for retail investors to get out before facing the train wreck.  Institutions were starting to migrate from the stocks almost a month prior in mid September to dividend paying stocks.  The charts were clearly showing that the  $DJI  index had crossed below the  50 day sma.  There were a cluster of  'Distribution Days'  piling up as well.  This was a clear signal to retail investors to scrutinize their positions and start migrating to  CASH.  There were  11  'Distribution Days'   by the time 1st week of October rolled around.  One should have migrated to  CASH  at that time while the  $DJI  was at 2560  instead of waiting after all the dust settled and the  $DJI  was down to 1660.  Institutions can't go into  CASH  like we retail investors can.  It takes them several weeks to completely get out of a position just because of the sheer size of their liquidity.

Institutions account for over  75%  to  80%  of trading volume everyday in the market.  Algorithmic computerized auto trading accounts for more than  50%  of institutional trading in todays high speed trading.  Triggers for trailing stops are set along the way and as such we as retail traders, have no edge with the institutional traders.  Its so critical for retail traders to respect the simple moving averages of 50 day and 200 day sma(simple moving averages).  These are the critical areas of support that institutions have on their radar.  If they don't support at these critical simple moving averages than we as retail traders just don't stand a chance.

Lessons  Learnt

We all have  'Recency'  bias as retail traders and investors.  Memories of the  2000  dot com bubble and the  2008/2009  market crash from the housing bubble are still very fresh on every ones mind.  Current market conditions are nothing like these two recent market crashes.  During these two recent market crashes as well as the one in 1987, the  50  day sma had rolled over the 200 day sma.  One can clearly see the waterfall look of the 50 day sma rolling over precipitously over the  200 day sma.  We don't have anything like that look on our major index charts right now.  Currently the  50/100/200  day sma are all running parallel to each other on a daily/weekly/monthly charts. 

During our regular monthly IBD (Investors Business Daily) meetup on Oct 9th, I shared and pointed out very clearly on the leading Growth Stock index  $QQQ  where it clearly violated the  50 day sma on Thursday Oct 4th.  Trading volume was twice the normal average trading volume that day.  By noon that day (2.5 hours of trading), there was as much trading volume as what one would encounter on a normal average day.  Clearly institutions were bailing out of the Growth Stocks and migrating to dividend paying stocks.  The next day on Friday, we encountered similar high average trading volume and the index dropped down to the 100 day sma.  This was clearly an indication of  'Market in Correction'   territory and a very clear signal to get into  CASH.  $QQQ  has eroded another  -5%  since  Friday Oct 5th.  Important lessons to take away is:

• Learn to read the stock and index charts.
• Learn to identify  'Distribution Days'   and the market pulse.
• Learn to create a Trade plan on any position you take.
• Understand and learn the creative ways of scaling into a position and scaling out of a position with staggered trailing stops.
• Most of all, protect your portfolio by all means and mitigate risk as much as possible. 

     

Stay in CASH and don't take any stock position under current circumstances.  Let the selling by institutions settle down.  Wait until the dust settles and get a confirmation that we are clearly out of the woods. In the mean time, do what I do ... Enjoy the gorgeous sunsets in Florida at this time of the year.  Take time off and enjoy the family.  You will eventually get a  'Follow Thru'  day.  Have patience.  Conserve your portfolio.

Happy Trading!

Amin

Did  u  Evacuate  the  Market ?

We were facing a hurricane in the market on Thursday October 4th when there was a major selling by the institutions.  Leading Growth Stock index  $QQQ  trading volume that day was 2 times the average daily volume and it had gapped down at the market open.  By midday there was just as much trading volume as the daily average volume of 40 million shares changing hands.  Index had already dropped down to the 50 day sma(simple moving average) by the end of the day on Thursday.  The carnage did not stop there and we had continued selling volume the next day as well.  By Friday close of the market, the index had dropped down to the 100 day sma.  

We had a  -10.25%   correction in the market at the end of January/beginning of February and again  -8.9%   correction in mid March but it took 9 trading days to get the index down to the 100 day sma.  This time around it took just 4 trading days to bring the index from the 20 day sma all the way down to the 100 day sma.  That was a brutal sell off in the market and as a retail trader/investor, it was time to bail out of the market and start raising  CASH.  At this time it really doesn't matter how good the stocks you have picked are.  One of the rules to follow is to cut the losses and bail out of a stock if the stock has attained a loss of  -5%  to  -6%  and kissing the 50 day sma.  

If you are a Growth Stock trader/investor, its always a good thing to remember that they tend to do twice as better as the general market does but they also fall twice as fast when the market corrects.  We have already gone through a  -9%  correction in the  $QQQ  and now we are at the  200 day sma.  Growth Stocks that took the pummeling last week, are probably down by  -15%  to  -20%  if no defensive action was taken last week to bail out.  You would have to make  +25%  in your next position to break even at this point.

Mr. William J. O'Neil (Founder of Investors Business Daily) has developed rules to follow for traders/investors that utilize his methodology.  Here is a link to the utube video of his interview.  It will help us all learn some sound basic rules to follow when the market goes into a correction mode the next time.  Click on the link below: 

https://youtu.be/IhsrJap6Oj0

Market  Condition

According to IBD (Investors Business Daily), the market pulse has changed to  "Market in Correction"  as of last Wednesday October 10th.  $QQQ  is down to the 200 day sma.  Institutions have to step in and support the market.  Most of the stocks are beaten down across all sectors and a lot of technical damage has been done to the stocks.  Friday was the first day of an attempted rally in the market.  It wasn't quite as powerful in trading volume as the one we had on February 9th.  We need 3 more days in a sequence of a market rally for confirmation that we are out of the woods.  This is the time to be cautious and not take any new positions until we get a  "Follow Thru"  day.  This is also the time to be looking at stocks that have held up during this market break down.  Stocks that have held up above the 30 day sma and exhibiting a strong  RS  line, may be the next leaders in the market.  This  "Follow Thru"  day may not be as strong as the one we had on Feb 14th of this year since so much damage has been done to the leading stocks.  We also have the 3 rd quarter earnings season in session now.

Stocks  to  Study

Lot of Growth Stocks have come down to the 50 day sma and what one ought to look at is a strong bounce off the 50 day sma.  Institutions generally support a stock at that level if they are interested in them.  Here is a list of stocks that have held up and indicating institutional interest.  I have highlighted in parenthesis what I consider to be the resistance point for each of those stocks.  Some are already extended and a bit risky at this point.  It's a good rule of thumb to follow of taking a small position initially during  a  "Follow Thru"  day.  Let the stock prove itself to you that they are worthy of your investment before adding to your position.

1. $CNC     ... ($143.79)
2. $HCA     ... ($133,79)
3. $UNH     ... ($264.30)
4. $IQV      ... ($125.35)
5. $WCG    ... ($303.95)
6. $BSX     ... ($36.45)
7. $ELY      ... ($22.97)
8. $ULTA    ... ($276.78)
9. $AAP     ... ($164.99)
10. $ORLY   ... ($334.02)
11. $WING   ... ($67.62)
12. $PLAY    ... ($62.86)
13. $ROST   ... ($95.57)
14. $TJX      ... ($107.26)
15. $AAPL    ... ($221.85)

Mentoring  Service

Leading Growth Stock index  $QQQ  attained a performance of  +32%  in 2017.  This year it is  +5.5%  inspite of the  -10.67%  correction that we just faced in the last 9 days.  The best 3 months of the mid term election year are ahead of us.  This is the 3rd year of a possible 9 year rally in the market.  Are you getting frustrated that you have been left behind and not fully able to capture the true potential of this unprecedented market rally?  Did you give up most of the gains of  +19%  that we had until 9 days ago?  Nothing should stop you from attaining success in the stock market.  

Schedule a 30 minutes of  FREE  "Discovery Call"  with us.  I will try to get you on board if you are committed to learning our system to Out Perform the Market.  The next 3 quarters historically - mid term presidential cycle year - tends to be some of the best quarters going back to year 1950.  Don't procrastinate and miss out on an opportunity to learn from me.

Happy Trading!

Amin

  We  R  not  Heading  into  a  Recession

It was a very brutal week last week.  Market took a turn for the worse on Thursday and it did not let up on Friday either.  Leading Growth Stock index  $QQQ  dropped  -3%  within the week and knifed through the 50 day sma(simple moving average).  It even went on to kiss the 100 day sma in volume that was more than 2 times the daily average volume traded with $QQQ.  Institutions were out in full force harvesting their well earned profits from the Technology Sector ($XLK) and Consumer Discretionary Sector ($XLY).  These 2 sectors have been the leading sectors to propel the  $QQQ  Growth Stock index to  +20%  by October 1st.  That sort of performance is not something to sneeze at.  You do however have to respect what the market is telling you and its prudent to take defensive action in the market now.  We have gone through 4 major corrections in the market this year after attaining its all time highs when the  $QQQ  dropped as low as the 100 day sma.  Here is the data of the 4 major corrections we had this year outlined below:

1.    Feb 8th          -10%
2.    March 23rd     -8%
3.    April 24th        -5%
4.    Oct 5th           -3%

Most traders and investors have a difficult time holding their emotions in check dealing with the market on a day to day basis.  Markets don't go up straight every day and one should expect the market to twist and make turns.  Market doesn't really care much for our opinions and well done research.  You just have to listen to what the market is telling you and pay attention to and respect the moving averages.  In the month of January of this year, the market was up by 10%.  Within 2 weeks after attaining an all time high on January 26th, market took away all of that gain back and  more within two weeks.  There is absolutely no reason to be in that sort of a predicament ever.  Learn to create a well thought out Trade Plan for any position you take and have the game plan to stagger your trailing stops should the market stumble like it did on Thursday and Friday of last week. 

Heading  into  the  best  3  Months  Ahead 

I know its hard to believe that October could be one of the best 3 months in the market this quarter after the brutal action we witnessed in just 2 days last week.  Let's just look at the historical data instead and hold our emotions in check.  Its true that we witnessed October market crash of the 1929, 1987 and 2008 when the market corrected over 50% and more.  According to Ryan Detrick of LPL Financial, he commented on CNBC on Squawk Box on October 1st that 

 "October tends to be a strong month for stocks during the mid term years, going back to 1950 through 2017"  

Since 1982, stocks have fallen only once during the mid term year in the month of October.  October has also been the best month going back all the way to 1950 for all mid term years.  On an average, October has an historical performance of  +3.3%  during the mid term presidential years.  Could we have a similar performance this year too ?  No one can predict that.  It's always good to be prepared should the market deliver such a performance.  As a reminder to my followers and readers of this blog, just know that the market did recover by  +12%  within 4 weeks after it had brutally corrected by  -10%  in January/February.  Market has been very resilient and the bullish trend is still intact.  Its a good idea to start raising  CASH  right now and be cautious in the market this week. 

Mentoring  Service

"Desire is the key to motivation, but it's the determination and commitment to an unrelenting pursuit of your goal - a commitment to excellence - that will enable you to attain the success you seek."

By Mario Andretti (race car driver)

Leading Growth Stock index  $QQQ  attained a performance of  +32%  in 2017.  This year it is already  +17%  with the best 3 months of the mid term election year ahead of us.  This is the 3rd year of a possible 9 year rally in the market.  Are you getting frustrated that you have been left behind and not fully able to capture the true potential of this unprecedented market rally?  Nothing should stop you from attaining success in the stock market.  

Schedule a 30 minutes of  FREE  "Discovery Call"  with us.  I will try to get you on board if you are committed to learning our system to Out Perform the Market.  The next 3 quarters historically - mid term presidential cycle year - tends to be some of the best quarters going back to year 1950.  Don't procrastinate and miss out on an opportunity to learn from me.

Happy Trading!

Amin