What I am doing in the stock market at the moment is nothing.
Two weeks ago I did a lot of selling, including selling all of the stocks that I bought last year, to simply take some money off the table to use later when I think the opportunities are better.
I just don’t see a great trade to make now in the markets, after the market has rallied like it has since October, with market participation doing all the bull work in the S&P 500 narrowing to just a few stocks. Really the best times to buy in the past few years have been AFTER stock market corrections, or bear markets, such as we got in 2022, which led to oversold conditions in stocks throughout the entire market. And now that bonds still pay 5% yields you can make money there as a guaranteed gains alternative to stocks, after these big rallies. Plus you have gold and silver.
Last year, in July, I stepped away from the markets – saying I was not planning to do any trades for awhile – and didn’t do any buying until November. Instead of just going away completely on vacation (I didn’t do a Youtube video from July to this New Years – NOT A SINGLE ONE), I’m going to put out some education videos about trading and investing this week.
The problem I see with buying stocks now is that the internals of the market have been fading since New Years, and this typically signals that a big rally is on borrowed time. It means you are heading for a market correction or even a new bear market at some point.
Now, as I pointed out in my last video update, it takes months of internal deterioration to lead to a new bear market, and this has just been going on for a few weeks. Back in 2021, it really happened from March to the end of that year, and the market averages continued higher as that year went on too. I pointed this out throughout 2021 – saying it meant a new bear market was coming – and then it came in 2022.
Take a look at this chart of the percentage of stocks above their 200-day moving averages back then and now and you can see what I mean, with how this indicator went down throughout 2021.
See how this indicator rolled over last year in July?
The market corrected after it did.
So, we could easily be heading for a correction soon again, like last year, perhaps until it becomes clear when interest rates will be reduced by the Federal Reserve.
If the internals, though, act like this through the summer, and don’t improve on the next rally, it would be a sign that we actually are in a major market topping process. However, it will take time for a true bear market to happen even if this is the start of the type of internal deterioration that began in the first quarter of 2021.
We’ll just have to see how they play out.
Either way, I do think that the market will rally again after a correction, or pause period here, that is likely to last for months.
Interestingly – if you think back, and remember 2021, the top in the internals that year coincided with the meme stock mania that hit all the news channels, not just financial news, associated with AMC and Gamestop.
Talking heads on TV were talking about how the little guy was now beating hedge funds and could triumph over Wall Street just as the market internals peaked. Both Tucker Carlson on Fox and Rachel Maddow on MSNBC were saying this to their viewers.
Now it is NVDA that is the fascination of the moment.
But, it is more like the Cisco stock of 1999 or 2000, than AMC or Gamestop, because it is not just the small Robinhood types that are chasing it, but the hedge funds and titan money managers too.
In other words – EVERYONE.
Back in January 2023, I was saying and writing that a new cyclical bull market was starting that would likely last for two years.
I actually bought NVDA at the end of that month, or early February, when it was under $200, because it was one of the big cap stocks inside the Nasdaq that had been displaying strong relative strength performance over the preceding few months, as that last bear market ended.
I thought it would be a new bull market leader.
I then sold it in March – so I’m not perfect.
That’s why no one will tell you when they sell and they always tell you to buy on TV or Youtube.
As Jim Cramer says – “buy! buy! buy!”
Well, I sold it.
I didn’t care, because other things I bought went up anyway.
Last year, I bought shipping stocks in the summer and sold them all two weeks ago for huge gains.
And now I’m not doing anything until I see something worth doing!
There are no fat pitches in the market I see right now.
And, no, the stock market is not going to crash this week either.
-Mike
