Today continued a pattern that we have seen lately and that is mainly last hour insanity. We had a pretty dull day going but in the last hour the market completely puked it up and in the last few minutes another little nutty rally helped take the market off the lows. The good news about the selling was that it was on lower volume. The bad news about the selling is that it seemed to hit the few strong stocks that were out there. This could be bad news for a potential rally.
If leading stocks can not get anything going and keep it going it is going to be very hard for this market to hold up and produce the gains that so many are looking for. I think that so many think this market is oversold that we have to rally. I hate to tell some of these people this little tidbit but if mutual, pension, and hedge funds continue to get daily redemption calls and momentum investors continue to abuse the no uptick rule it could be a while before that magical bottom that has been called repeatedly the last year. I think there have been at least 5-6 MAJOR bottom calls by the media and NONE of them have been right. Eventually they will get it right but at what cost to your portfolio.
I will simply never understand why those who decide to get involved in the stock market in the first place will not do more homework and can not grasp the idea that you should be long a market moving up and either short or cash in a market moving lower. Selling stocks higher in anticipation of them falling and buying stocks crashing to earth because they are too cheap barely made sense to me when I read my first book on investing. I find it impossible to believe, now, that so many people still believe in this mantra.
If you don’t think they do, think of how many people have asked you if stocks are “cheap” enough to buy now. If you are in the business like me and live somewhere where people are basically walking tools of whatever the newest trend in thinking and believing is you will quickly find out that everyone wants to know if stocks “are cheap enough to buy.” Not only that but they seem to want to buy the stocks hit the hardest trading around $1 to $5. This proves, yet again, that basic history has not even been studied.
If anyone would actually do the research or even look-up the data that IBD did on this they found out that stocks making fresh 52-week highs do MUCH BETTER in one year than stocks that make fresh 52-week lows. History has PROVEN that stocks hitting new lows for the first time continue to do so for some time in the future, the majority of the time. On the opposite end, in bull markets, stocks that hit fresh new 52-week highs continue to go on to make new 52-week highs. This is NOT my opinion. These are facts from IBD. I obviously can not give you the number as I do not have the most recent data on this. However, my own experience has ABSOLUTELY PROVEN this to be the case.
