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Last Monday, May 11th, I posted the Market Memo I sent to Educational Members on this blog. I want to provide an update since we saw some interesting price action since last Monday.
Monday’s post mentioned that we could see some profit taking soon and we ended up seeing distribution on Tuesday (on the Nasdaq Composite) and Wednesday (on the S&P 500). Although the major averages dropped approximately -6% during the middle of the week, the leaders barely budged and acted very well. During uptrends, it is normal to see occasional selling and pullbacks to the 20-day moving average (on both the leaders and the indexes). In my MidWeek Video to members on Wednesday, I mentioned that I would be on the lookout for more possible distribution. I was planning on reducing exposure further if this occurred and I could always increase exposure if the market stabilized.
What impressed me the most on Thursday (early in the session) was how the major averages were down but the majority of stocks on my screen were green. Also, sentiment was getting bearish again so I decided to increase my exposure from 50% back up to 80%. Please keep in mind that this type of active management is not for everyone because it involves watching the market, being nimble, and making decisions. If you don’t have the time to watch the market closely, then I recommend keeping smaller positions and sticking with the trend. For people with shorter-term timeframes, strong stocks should hold their 20-days in uptrends. For the longer-term holders, use the 10-week moving average as your guide.
Overall, I remain bullish on this market because the leaders are acting well, the Fed is on our side, and sentiment is muted as many people are still scared, bearish, and under-invested. Of course, I will be on the lookout for more distribution this week and I will be watching the leaders. If I see any warning signs, I will reduce exposure if needed. Good luck this week, remember to stay focused on the leaders, and always protect your confidence.
If you are interested in more detailed market analysis, please visit the link to my new Educational Product: https://joefahmy.com/investor-education
I can be reached at: jfahmy@zorcapital.com.
Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this blog constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this blog. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.