The selling over the last week has left a lot of severely damaged stocks on a technical basis and the overall environment continues to be HIGH RISK. Not only is it high risk to be buying stocks right now, but it is also risky to be selling short after the market has sold off as much as it has in a short period of time.
The hardest job on Wall Street is picking bottoms. I have never met or heard of anyone who can successfully pick bottoms in stocks with any degree of consistency. No indicator has been created which can accurately confirm the moment when selling finally runs its course. Selling in a declining market is exaggerated by fear just as upside pressure is fueled by greed, the difference is that the emotion of fear is a much greater motivator than greed. Fear causes people to act irrationally and that can be a scary sight to see as it unfolds. What you have to remember is that bottoms are a process, they are not an event. It is rare for the market to make a “V” bottom, where the market suddenly turns higher without warning after a period of selling. The more common scenario is a gradual shift in the supply/demand dynamics where the sellers lose momentum and careful buyers start to slowly regain control of the stocks again, this process is known as Stage 1 Accumulation and it follows Stage 4 Decline.
QQQQ (click chart to enlarge)
Today’s trading could bring the elusive turn higher, but again, the risks remain high and that keeps money management at the forefront (missed opportunities are better than lost money). Some of those oversold stocks I mentioned this weekend which are showing signs of accumulation on a short term chart include; AVCI, CELL and CTXS. A couple of other stocks which are in a primary uptrend and showing accumulation on a short term basis include; IMMU and PCLN. These are good stocks to keep an eye on today as they are in the best position to move higher if the market can add to the late day strength and stage a turnaround.
I am traveling this week and that makes it so I will not be able to post any videos, however I will be making occasional posts similar to this one. Look for a return of the videos on Saturday.