It is amazing to me that people I talk with who are in the market and are more than casually interested in trading continue to look for stocks to buy. We are in a serious decline and I have been mainly short or in cash since early this year. People refuse to accept what the market is saying–they only want to buy. I have always done best when I ignore the media and just look at my charts. The great Nicolas Darvas made 2 million dollars while traveling around the world. When he camped out in Manhattan, he lost his objectivity and consistently made losing trades. He had to leave the country to get back on track. You can’t make good judgments if you are glued to CNBC and tipsters. I want a life, too.
The year after a presidential election is typically bad and the 4 year bull/bear cycle suggested to me a top in 05 and a bear market bottom in 2006. Bear markets have occurred almost on schedule since I began trading in the 60’s: bottoms occurred in 62, 66,70,74,78,82,87 (came late), 90, 94, 98, 02, 0?. It does not take a Ph.D. to discern a pattern (even though I have one).
I cannot predict the future. I can only read the present market conditions and react when it changes. We are in a sustained decline in the major indexes that began in January. More than 70% of stocks go with the indexes. So, instead of searching for a stock that will fight the trend (with a 30% chance), it is better to go into cash or short (where we have a 70% chance of success). To make money in the market one must go with the better odds.
So, what looks sick? It appears to me that the housing stocks are finally beginning to drop. I will short a housing stock this week.