After a long streak of declining markets, I woke up this morning hoping we would start the new week off with a bit of good news from Wall Street.
After all, the stock market has been in such bad shape lately, that this week’s watchlist includes nothing but struggling stocks that I’m recommending we short!
Folks, if a recommendation list full of short recommendations isn’t a sign of a weak market, then I’m not sure what is.
As you can imagine, I was left disappointed, yet again, as I opened my computer and saw the markets bleeding red all over my screen as declining issues continue to outpace advancing ones by a wide margin.
After reviewing the latest charts a bit further, I saw indexes were not only struggling but had opened even lower than previous updates.
Now, it can take a few weeks for stocks to reposition themselves and come back into tight, low-risk ranges where we can buy.
And even after the market calms down, we’ll need to be patient for it to begin showing some strength again.
Here is a screenshot of the TradingView heatmap from Monday morning.
That’s a lot of red, guys!
The lack of participation I have been warning about for several months is now on full display as mega-cap names like Microsoft, Google and Nvidia finally succumb to the correction we have been seeing below the surface.
That’s just the beginning, though…
Surviving These Volatile Times
As of last week, over 40% of NASDAQ stocks have fallen by at least HALF from their previously reported highs.
Think about that…
Four out of every 10 stocks have been cut in half!
And only 17% of stocks in the Nasdaq Composite are above their 200-day moving averages.
In other words… 83% of stocks are now in long-term downtrends.
This is why I trade with tight stops…
We just never know when a 10% pullback is the beginning of a 50% drop.
And, honestly, it is better to take a small loss and preserve your capital than to risk it all on a big gamble in a volatile market.
The good news?
Corrections like this are healthy over the long term.
What we’re seeing in today’s markets has happened before and will most definitely happen again.
Stocks, simply, cannot go up forever.
That means, from time to time they will need to pull back, digest the selling, and set up for the next wave higher.
And once all the big players have sold and the markets have bottomed, that is the time to strike.
That is when you have the best opportunity for profit.
Think of it, over 90% of super performance stocks over the last century started their ascent from the same place… A bear market bottom.
And once you’ve reached the bottom, there’s only one way to go…
Our Next Move…
Folks, now is not the time to make drastic moves.
Now is the time to sit on the sidelines, pool our resources, and wait for the next wave of market leaders.
Eventually, they will emerge. And we will definitely want to be there when they do.
Embrace the surge,
Editor, Stock Surge Daily