Investor Spotlight

Should You Bail Out Of The Market

We had a market correction on Thursday August 10th with a "distribution day" but it bounced back for the next 4 days only to follow with another "distribution day" on Thursday August 17th. Lot of my readers and followers were expressing concerns and feelings that the market had topped. They wondered if they should not be in the market at this time. They kept saying that August is typically a bad month in the market. I do agree with them since August performance has been +0.10% looking over the average performance over the last 50 years. I also reminded them that August of 2014 however was a stellar month with over +4.00% performance for the month. How often do you get that kind of a performance during the summer months? I sensed that kind of a question in their minds because the data I presented was just brushed off by them. July of 2015 and 2016 were equally stellar months too according to the data. You have to be data driven in the market and not your "feelings" That is why I spend Saturdays and Sundays to study the market and scrutinize the stock and index charts for clues.

Market Conditions

Currently we have 14 "distribution days" according to IBD(Investors Business Daily) They identify market pulse as "Market Under Pressure" This should be a signal to the retail investors to start selling into strength and accumulate CASH. If one has to take a position in a stock, it should be done with a very small position and only in the top performing leading stocks. Personally I would go a step further and limit my losses and capture the profits with a trailing stop on all existing positions.

In my post last week, I had mentioned that our bull market is still intact. We are continuing to see higher highs and higher lows on the 3 major indexes. What we are witnessing right now is the retracement and a counter trend in the overall uptrend. Here is the data for $QQQ for the last 3 significant major distribution days we have witnessed during the last 3 months:

5/17 ... -2.54%
6/9 ... -2.54%
8/10 ... - 2.14%

I still heard from my readers "Oh but this time it is different". My analysis shows that we had a cluster of "distribution days" in June/July/August when the $QQQ dropped significantly as shown below:

6/8 to 7/13 (17 sessions) ... -5.14%
7/26 to 8/18 (23 sessions) ... -2.57%

$QQQ would have to drop another -2.57% down to $139.40 to match the performance we had between 6/8 to 7/13. Market suddenly doesn't look so bad when you start looking at the data and keep your emotions at bay.

My Performance As A Hedge Fund

No ... I am not a hedge fund. Last Monday, I listed 34 leading growth stocks (hedge funds would have that many stocks in their portfolio) on twitter and suggested to my readers to be defensive and have trailing stops on those stocks. Here are the results of the performance of those stocks for the week. 6 of the 34 stocks were stopped out with the trailing stops to mitigate the losses. They r listed first, followed by 28 stocks that have continued to go higher or have traded lower but not stopped out yet. Trailing stops have been adjusted up wards for next week, should the market retrace some more. I have indicated in parenthesis, how much was the loss and how much was the gain for the week of 8/14 to 8/18

$AMP (-$0.36)
$AON (-$0.39)
$AGO (-$0.07)
$UNH ($1.02)
$PETS ($2.76)
$VRTX ($2.78)
$HDB ($0.73)
$MA ($2.59)
$V ($2.42)
$PGR ($1.42)
$PYPL ($1.40)
$CBOE ($0.07)
$ALL (-$1.03)
$ABMD ($0.77)
$ALGN (-$4.95)
$CI ($2.65)
$CNC ($1.35)
$GRUB (-$0.59)
$ANET (+$6.32)
$IPGP ($1.97)
$MNST ($0.23)
$RACE ($3.95)
$CDNS ($0.61)
$ASML ($1.07)
$FB (-$0.67)
$BABA ($15.80)
$RCL ($1.59)
$CCL (-$0.02)
$NCLH (-$0.99)
$LMT (-$4.55)
$RTN (-$2.45)
$BA ($0.89)
$MRCY ($0.89)
$NVR ($-22.15)

If I was a hedge fund manager and i had all these leading stocks in my portfolio, my performance overall would be just -0.6% for last week when we had piled on 5 more "distribution days" That is a pretty impressive performance if I must say so.

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