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Learn the Signs of a Market Top

08/20/2010 02:24 AM

I would say around 90% or more of all traders and investors, ultimately lose money trading the various markets. What generally happens is that most traders buy a lot of stocks, at or near, market tops, and sell their stocks, at or near, market bottoms. This is simply a recipe for financial disaster. It is important to note that 75% or more, of all stocks follow the general market trend. What is really amazing, is that most mutual fund managers do not have a clue, when it comes to understanding clear warning signs of an impending stock market correction, or possible major bear market. There is no way of knowing just how far a market can go down, before it finally hits the bottom. Early in 2000, there were signs, signs, everywhere a sign, that the stock market was in big trouble. Most mutual fund managers, not understanding these clear warning signs, lost enormous amounts of money for their clients. I was completely out of the stock market, and in cash, months before the market really started to crash. I implemented proper price and volume analysis, along with knowing, and acting upon other clear warning signs. The NASDAQ ultimately fell 78%, from its peak in March, 2000, until the bottom finally happened in October, 2002. Without getting into detail, here are some of the warning signs that a stock market top is likely imminent. No individual stock, or the stock market itself goes up forever. Ultimately, at the very least, there will be a correction. If, after an extended uptrend in the stock market, it goes up an incredible amount, in a relatively short period of time, watch out. This is called a climax run, and is a strong warning sign of a coming market top. Another solid sign of a market top is when the stock market has 5 or 6 distribution days in a 2-4 week time span. A very basic definition of a distribution day, would be a down day in the market on heavier than normal volume. The leaders of a stock market uptrend are a key force in keeping an uptrend going. Once you see leaders of the market start to falter, this is another key warning sign of trouble in the overall market. Other warning signs to watch for include, a trend of rising interest rates by the Fed, and a slowdown in key areas of the economy. Always be on the watch for possible signs of a market top. It can save you a lot of money and frustration.

Screen of the Week 08/17/2010: A Relative Price Strength Screen for All Markets

08/20/2010 09:37 AM

Over the last few weeks, with the market going down, I've found myself screening for stocks that are actually going up or at least doing better than the market. I've talked about this kind of stuff in the past, but think about it - if somebody were to ask you what your best stocks are: your best stocks would be the ones moving up and your worst ones are the ones moving down. Stocks moving higher have a tendency of moving even higher. And the stocks I've been looking at recently are indeed the ones moving higher. Or at the very least, stocks with a relative price strength better than the market. And if they are performing better, it's likely because there's a good reason for them to be doing so. If not, they probably wouldn't be. Of course, this doesn't mean you should only look at its price change. But by including those kinds of things in your screening, some very interesting stocks will come up. You'll also notice that I said relative price strength. There are, of course, periods where virtually everything is going down. So screening for absolute positive price changes will often times come up with zero results in these periods, just when you need them the most. But also, when the market is doing nothing but going up, you want to get into the pacesetters and outperformers, not the laggards that are going up only because the rising tide is raising all the ships. So using the relative price strength will always put the outperformers on your list in both good times and bad. In this week's screen, I'm looking for relative price change winners that also have the fundamentals to potentially make these gains continue. The screen starts off with: * Relative % Price change - 12 weeks greater than 0 * Relative % Price change - 4 weeks greater than 0 * Relative % Price change - 1 week greater than 0 (I'm looking for stocks that are outperforming the S&P 500 over the last 12 weeks, 4 weeks and 1 week.) * Projected Growth Rate (F1/F0) greater than the S&P 500's Median Growth Rate (Not only do I want the price to be responding better than the market. I also want the growth rate to be better than the market.) * Current Price greater than or equal to 5 (They all have to be trading at a minimum of $5 or higher.) * Average 20-Day Volume greater than or equal to 100,000 shares (And have a enough volume to allow easy trading in and out.) Here are 5 stocks that made it thru this week's screen: ARLP - Alliance Resource Partners, L.P. HMIN - Home Inns & Hotels Management Inc. LVS - Las Vegas Sands Corp. MGA - Magna International Inc. TKR - The Timken Co. All strong stocks fundamentally, and they are on the move and outperforming the market. Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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Latest News about private investments

Learn the Signs of a Market Top

Screen of the Week 08/17/2010: A Relative Price Strength Screen for All Markets