Harken Back to the Old Days
"When the market leaders begin to lose relative strength even though the news is still very good, and buying strength and selling weakness no longer works, get out of stocks in general because the game is over.
It is enough for the experienced trader to perceive that something is wrong. He must not expect the tape to become a lecturer. His job is to listen for it to say "Get out!" and not wait for it to submit a legal brief for his approval."
This is a quote from Reminiscences of a Stock Operator, a book about possibly the greatest trader who ever lived Jesse Livermore. When I came across this saying the other day, a light came on. Look at this list of stocks: AAPL, GOOG, NTRI, ISRG, HANS. This list goes on. These stocks have led the market for years and are now getting slammed. Now I don't know if it is temporary but I must say that it is a good enough warning for me, and that I have to say I listened to it. Right now I am basically holding some in healthcare and a telecom and some international exposure. I can always move back in quickly, but right now the sidelines are fine.
posted by Random Thoughts at
7:22 PM
2 Comments:
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Anonymous, at 8:11 AM
agreed. the leadership was narrow in January, mainly driven by energy related stocks and the former leaders like AAPL and GOOG couldn't attract new buyers.
last week saw this now important market component (commodity related assets) with a lack of new buyers, too. it's the typical "greater fool theory" at work here...with everybody (media, analysts, investors) talking about the long-term positive outlook for oil, gas, ethanol, sugar,etc. the "belief phase" had started...problem is, when everybody knows a story and everybody "understands" and accepts a theme...well, then that's the time everybody is long the stock, the sector, the market, etc.
very short-term (next week),however
I would note that the stocks you mentioned (AAPL,GOOG) seem to have a good chance of a bounce in an oversold condition. why? both are trading at the low end of a channel since early January and both stocks did NOT show further deterioration on Friday. (i.e. they are not the leaders in last weeks consolidation); we will see.
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Anonymous, at 10:50 AM
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