Minyan Mailbag - Kevin Depew
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.
Since 2005 began, there has not been a single day where NYSE stocks have had more new Point & Figure buy signals than sell signals. The Nasdaq BP saw slightly more point & figure buy signals from 12/31 to 1/3, but since 1/3 the Nasdaq has also not had a single day with more net point and figure buy signals. This is typical of distribution, and given the very high risk field position the risk remains to the downside despite oversold conditions.
On a weekly basis, since June 2003 the average stock has fallen to increasingly oversold levels on pullbacks while rising to decreasingly overbought levels on rallies. This too, in my opinion, is pointing to distribution underneath the market that is disguised by the "durability" of the popular averages. One unfortunate possibility for retail investors with diversified portfolios is that, similar to 2000, by the time the major indices falter, if (big if) they do so, for the retail investor it will already be too late.
Diversified retail portfolios tend to act like the average stock, and so the carnage in certain types of distribution phases can affect them more quickly, many times before they are even aware of what is happening. Not advice, just sharing some thoughts.
Minyan Kevin Depew
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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