This Slow Market Action Is Needed to Build the Foundation for Another Leg Higher


The indices are drifting around and breadth is slightly negative which makes for very slow action but this is what is needed to build the foundation for another leg higher. Oftentimes the first bout of weakness after a strong uptrend causes an overaction as bulls rush to protect good gains and the bears finally feel relieved that the market stopped going straight up.

In this sort of action I tend to focus much more on the individual stocks I’m holding rather than try to predict what the indices will do next. There really is no better indicator of market health than your profit and loss statement. When you start losing money that is a sign that either the market is shifting or you are holding the wrong stocks and that requires that you act.

My profit and loss indicator went off yesterday and that caused me cut back some exposure, but I’m seeing quite a bit of positive action today and that is preventing me from being more negative.

A couple of good looking charts on my screens right now are iQIYI (IQ)  , which is often referred to as the China Netflix (NFLX)  , and Aurora Cannabis (ACB) . Both stocks are testing recent highs which isn’t something that you see when the overall market is struggling.

It is always easy to formulate a thesis for a bull or bear market but if you want actual proof then focus on your P&L and watch for good chart setups in individual stocks. Those two things will tell you more about the health of the overall market than anything else.

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2019-03-05 11:34:00

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