This is the checklist that I go through everyday when deciding whether or not to initiate any new long positions. They are in no particular order and I only buy when all of them are checked off.
- Is the $SPXEW (The S&P500 Equal Weighted Index) above its 20DSMA? : No
- Is the slope of the $SPXEW ‘s 20DSMA positively sloped? : No -0.14%
- In my universe of stocks which is comprised of stocks that have an average daily volume of at least 100k shares, trade above $5, and have positive sales growth versus the year ago quarter, is the ratio of new 52w highs to the sum of new highs + new lows 80% or greater? : No 50.9%%
- Of the S&P500 stocks is the ratio of new 52w highs to the sum of new highs + new lows, known as the $RHSPX, 80% or greater? : No 50%
- Have you read at the last 10 press releases that the company you are looking at has issued?
- Does the company you are looking at have a CQGR of 3.75% or higher in their Sales, roughly equating to a 15% or higher yearly growth rate?
- Does the company you are looking at have a CQGR of 3.75% or higher in their Earnings, roughly equating to a 15% or higher yearly growth rate? (However, I am not dogmatic on this one, as sometimes stocks with negative earnings can still rip higher on the expectations of future profits)
- Have you listened to the company’s latest earnings conference call? Do you know what was/is their guidance for the next quarter?
- Do you know when the company you are looking at will report their next quarterly earnings?
- Can you name at least one, but preferably 2, of the company’s peers? For example Nike, Under Armor, Lululemon. Do you know when your company’s peers report earnings?
- Have you checked if this company history of beating analyst’s estimates? You can check here by typing in the ticker you want.
- Do you know what the short interest is on this stock? Both the number of days to cover and the percentage of the float.
- Do you know how many analysts cover the stock? How many are a buy, sell, or hold? Are there enough negative analysts to have future upgrades serve as positive catalysts?
Every single indicator that I look at is telling me the same thing: we are not in an uptrending market and it is not safe to initiate any new long positions. Right now the best thing you can do is nothing. Hold on to your fundamental longs if they are holding up well, like $LULU or $NFLX, etc., But it is simply too risky right now to be putting on new longs into this market. No one knows how long this choppy, sideways, downward movement will last. Eventually it the market will reach a bottom and a new bull market will begin, that’s when we’ll go hugely long. For now just monitor the market, preserve your money, and wait for the right moment to go heavy on the long side.