Let Your Stocks Do the Talking

We have stated that, in our opinion, the market is somewhat vulnerable in the short-term, but at this point, we suggest you let the stocks in your portfolio do the talking.  That means that if you have a stock that has moved up (bull markets move most stocks  - even the dogs), but you recognize that the fundamentals have deteriorated since you bought it, then set some parameters to sell that stock IF it violates a trend line or a momentum gauge of some short-term charting measure.  Relative strength is often a good methodology to watch.

It is interesting that the trend of relative strength has changed this bull market.  You can see that in some of our sector studies.

You can see from the previous chart showing the percentage of all stocks in the combined S&P 500 and S&P 400 trading above their 200-day moving average has just reached the high point for recent years.  A healthy bull market lifts all boats, and this one has been very healthy.  But as we point out in our weekly US Sector Update, there are some areas that are acting better than others.  If you see one of your stocks that has flagging fundamentals start to lose some of their rising relative strength, then that would be - in today's environment - a possible sell candidate.

Those are our suggestions this morning.  The key message, in our opinion, is that there is still a huge reservoir of monetary liquidity, so any correction that might be pending (to repair some hair cracks in the Wall of Worry) should not be considered any more than it is - a correction.

Don Hays

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