The following are the comments we as we could see the market weakening the end of August, first of September.
The comments are archived and are available for all to see, as well as the stocks we have had on our watchlist, the following link will take you to the archives.
savvy-trader.com
August 29: However, for the first time in a couple weeks, the short screen produced more stocks than the equivalent long screen. This may be an early warning, we'll keep a close watch on it.
September 1: The stock screening still produced a surprising high number of short candidates, about the same number as longs, despite the good market rally. And picking longs, that were not too extended, was pretty tough.
September 5: The market internals backed down a bit Friday, but still look positive. The ratio of longs to shorts on the screening are about even.
As most of you know I had figured that the market would climb until the second week of September or so, decline when the earnings warnings start coming out, and continue down for the first two or three weeks of October. Mostly based on the assumption that we would have a weak earnings season, which will provide the usually buying opportunities in October. Also, there are some aspects of the coming election that have me concerned, primarily the anti-business/anti-profit rhetoric. This, of course, comes with the caveat that I don't make any bets on the long or intermediate term, that I've found following the trend of the internals keeps you (for the most part), in during the climbs and out during the slides.
So, over the long weekend I spent a fair amount of time reading what the well-known market forecasters saw between now and the end of the year. I was surprised at how bullish they were, most don't see any decline. I hope they are right, but just in case, keep a bottle of healthy skepticism close by.
September 6: The market internals backed down even more on Tuesday, but not as bad as I had expected. A caution flag may be up at this point. The ratio of longs to shorts on the screening favored the shorts 10 to 7.
September 7: The market internals weakened a bit more, and the two stock screenings that are a mirror image of each other provided many more shorts than longs. This indicates that the stocks going down are getting the volume. However, there is still profitable long positions off the list, and we may see a bounce, so I'm hesitant about going into "lite" mode just yet.
September 11: The market internals were mixed on Friday but mostly negative. The stock screening provided more shorts than longs, but still a surprisingly high amount of each. The trading seems to be getting treacherous now as we get more and more earnings warnings, I'd be more cautious and add long positions in "lite" mode.
("lite" mode is a risk reducing technique used when the market risk looks high. 1) Trade a smaller number of shares in each position, 2) Diversify positions or cash, 3)Tight stop losses, 4)Take profits before the close on positions that are close to your buy point, 5) Limit the number of times you get stopped out without seeing an improving market.)
Sam
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