Top 10 Report – March 23, 2020

Market Insight

The major indexes dropped sharply last Monday and then ultimately moved sideways for the rest of the week, despite whipping back and forth in an extremely volatile manner.

On a positive note, the most recent rally attempt is still intact. However, it’s hard to interpret last week’s action as anything other than a brief pause before the major indexes roll back over and continue to make lower lows.

Most of the market’s prior leadership has now been badly damaged. Many of these names will never recoup old highs, and plenty will just flat out disappear over time. After 25 years in the business, I have seen quite a few ticker symbols be recycled, some more than once.

Also, even if we see a follow-through day occur sometime this week, without a broad base of fundamentally sound leadership ready to break out of well-formed bases, it is highly unlikely that a sustainable general market uptrend will ensue.

Given the current state of the market’s leadership, it’s hard to imagine that it will be healthy enough to support a sustainable new uptrend in the general market any time over the next week, although stranger things have happened.

Therefore, in rare and extremely volatile times like these, I find it best to sit in cash and protect financial and emotional capital, while I let the big institutional investors carve out the bottom. Then, like a lion stalking its prey, I jump on their coattails once the odds of a sustainable uptrend are highly in my favor.

It’s not all that different from counting cards, where you absolutely do not play unless the deck is hot, and right now… the deck ain’t hot.

Until the general market signals that a new uptrend has begun, cash is king. Avoid the temptation to trade out of FOMO or boredom. Put on a couple very small “feeler positions” if you must. Otherwise, sit on your hands until the probabilities are heavily back on your side.

The Indicies

The NASDAQ dropped sharply last Monday, then proceeded to whip back and forth sideways in a volatile manner, to ultimately close near its lows for the week as volume absolutely exploded.

The laggard Russell 2000 has declined the most of all the major indexes so far, touching levels seen as far back as June ’13.

The S&P 500 dropped sharply last Monday, then proceeded to whip back and forth sideways in a volatile manner, to ultimately close near its lows for the week as volume absolutely exploded.

The DOW dropped sharply last Monday, then proceeded to whip back and forth sideways in a volatile manner, to ultimately close near its lows for the week as volume picked-up tremendously.



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