Here is a note I sent to Educational Members last night (Monday, May 18th). Please keep in mind that I will not regularly update this blog with current market thoughts. I am just trying to give people a feel for the type of detailed analysis I am providing with my new product. If you are looking for regular real-time market analysis and stock idea generation, please visit the following link to sign up: https://joefahmy.com/investor-education
I don’t mean to be so short-term with my analysis, but the market is very fast moving and I want to keep everyone updated on my thoughts. I just ran through my nightly screens and found very few quality setups. There’s definitely tons of strength in this market but most of the strong stocks are technically extended from their bases and proper safe buy points. When I emailed members last Monday night (5/11/20), I noted the Equity Only Put/Call Ratio was 0.50, the lowest reading since the S&P 500 peaked on February 19th. Today (5/18/20), it came in at 0.47. Again, this isn’t the only sentiment measure I look at, and low readings can go on for a while. However, when we see a few readings around 0.50 in a short period of time, I have noticed in my experience that the market is usually due for a pullback or at least some stalling.
As I mentioned last Monday, since I identified the follow through days in early April, we have seen a strong run in so many growth stocks. I started to lock in some gains last week and dodged much of the damage during the mid-week selloff. When things stabilized early last Thursday, I increased my exposure and caught a few nice days into today. My plan from here is to reduce exposure again tomorrow, especially if we see more strength in the morning.
Again, my style of active management is not for everyone and this is where I encourage people to make their own decisions. Know your timeframe, know your risk tolerance, and stick to your own plan. If you have a strong entry on some stocks and a longer-term timeframe, you can use the 10-week moving average as your guide. If you have a shorter-term time frame, it never hurts to lock in some profits and use the 20-day moving average as your guide.
Of course, I can always be wrong and the market can grind higher but it makes sense for things to slow down here because over 90% of the S&P 500 companies already reported earnings. In other words, the news will likely shift back to politics, geopolitical concerns, and covid cases, which could spike again as the country slowly opens back up (obviously, I hope this doesn’t happen). I guess the best way to describe my current stance is short-term cautious and longer-term bullish. I will discuss this further in Wednesday Night’s video.
Thank you,
Joe Fahmy
If you are interested in more content like this, please visit the link to my new Educational Product: https://joefahmy.com/investor-education
I can be reached at: jfahmy@zorcapital.com.
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