We all know the expression, “A rising tide lifts all boats.” Last year we saw such an unusual broad-based stock market advance that every sector participated on the upside. Now we are seeing leadership getting narrow and finding stocks I want to invest in is getting harder. The leadership is coming from mostly momentum stocks that do not rank highly on my Magnet® model, and to me that is a bad omen. The advance/decline has deteriorated and that is another bad sign for the short-term health of the market. Small-cap stocks are getting hit hard while mega-cap stocks have kept the market looking stronger than it is. I have been saying for a while the market needs and is finally set up for a real correction. I am not suggesting a bear market is around the corner. I think we are just seeing a high tide going out. As I have mentioned in recent articles, I think the market will rest or even correct, but will only be setting up for another run significantly higher.
It is not hard to identify stock hitting new highs. All you need to do the look at the list. But when I run them through my Magnet model, I am just finding most do not trade at the value levels I need to get invested in them.
I have invested in a few new longs that meet all the Magnet criteria, but selectively is the real key as leadership has clearly become narrow.
Shorts- NetSuite Inc. (N), Chico's FAS Inc. (CHS), ViaSat Inc. (VSAT)
By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU).