I have gone to great lengths in this column to remind everyone that I do not have a crystal ball and do not pretend to know the future. Over the last few months, I have made some terrific market calls, but I refuse to read my own press clippings. I like to repeat an old saying, “The more the market goes my way- the humbler I become.” When it comes to investing in the stock market, you must simply try to put the odds in your favor and then control risk through proper portfolio management. There is no room for ego in this business.
I use a variety of tools to gauge the health of the market. The advance/decline lines, the new high/new low radio, and volume on up/down days are all factors I think you need to look at. I also like to watch the yield curve to try to get an early warning sign on the general economy. These indicators have been flashing yellow warning signs to me, and as a result I have raised a significant amount of cash in our Magnet® managed accounts.
Risk on the Rise for High Volume Companies
I am not suggesting we are about to see a near term crash by any means. I have been updating and monitoring my watch list. I am only interested in those companies that are pulling back on light volume. Anything that “gets wacked on high volume” is removed from my lists. I still see many constructive charts with several “Top Ranked Magnet® Stocks”- but the market is clearly suggesting risk is on the rise.
A few smaller companies that are less sensitive to the dollar strength are now showing up on the top of the Magnet screens and have made into my portfolio. I will not share those ideas in this column, but would be happy to discuss them with our readers. For now, just remember it is not how much you make in a Bull Market- what counts the most is how much you have left after the next Bear market!
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