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This Stock Market Is Providing Too Many 'Closeout Sale!' Days – So, Raise Some Cash


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Scaffolding stands in front of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg

Once again, the stock market is hanging around its major bottom. This apparent buying opportunity has happened too frequently. Think of the opposite view: Major selling is at work by those who know not to break the 10%, 200-day, obvious bottom barrier. Doing so would trigger alarm bells and bring in many other sellers, thereby producing rapidly falling prices.

Disclosure: Author holds only cash reserves

Here are the three key index graphs: S&amp;P 500 Stock Index, Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA). These graphs show the depth and breadth of this persistent bottom bouncing, with an easily seen&nbsp;downside barrier. Note, too, the lower highs on each “rebound” that can be a sign of growing weakness. And look at the speed that the 50-day moving average is falling – it is important because it was the measure of stock and index performance throughout 2017’s bull market.

The DJTA is included because its similar picture to the DJIA means a breakdown likely will send a “bear market” signal according to the Dow Theory. Many follow this indicator, so expect heavy selling if it occurs.

John Tobey

SP500 Stock Index

John Tobey

Dow Jones Industrial Average

John Tobey

Dow Jones Transportation Average

The bottom line

The positive fundamentals supporting this market are all known. Yes, the first quarter earnings reports are around the corner, but expect two things: As soon as they are reported the expected good news is out, meaning itchy holders could sell. Second, the optimistic trend lines that the tax bill caused to be drawn from that point likely will become less certain because even a positive resolution of the tariff ruckus could be weeks/months away.

Therefore, raising cash reserves now rather than hoping the downside barrier holds looks like the best strategy – for potential buying opportunities as well as peace of mind.

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Scaffolding stands in front of the New York Stock Exchange. Photographer: Michael Nagle/Bloomberg

Once again, the stock market is hanging around its major bottom. This apparent buying opportunity has happened too frequently. Think of the opposite view: Major selling is at work by those who know not to break the 10%, 200-day, obvious bottom barrier. Doing so would trigger alarm bells and bring in many other sellers, thereby producing rapidly falling prices.

Disclosure: Author holds only cash reserves

Here are the three key index graphs: S&P 500 Stock Index, Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA). These graphs show the depth and breadth of this persistent bottom bouncing, with an easily seen downside barrier. Note, too, the lower highs on each “rebound” that can be a sign of growing weakness. And look at the speed that the 50-day moving average is falling – it is important because it was the measure of stock and index performance throughout 2017’s bull market.

The DJTA is included because its similar picture to the DJIA means a breakdown likely will send a “bear market” signal according to the Dow Theory. Many follow this indicator, so expect heavy selling if it occurs.

John Tobey

SP500 Stock Index

John Tobey

Dow Jones Industrial Average

John Tobey

Dow Jones Transportation Average

The bottom line

The positive fundamentals supporting this market are all known. Yes, the first quarter earnings reports are around the corner, but expect two things: As soon as they are reported the expected good news is out, meaning itchy holders could sell. Second, the optimistic trend lines that the tax bill caused to be drawn from that point likely will become less certain because even a positive resolution of the tariff ruckus could be weeks/months away.

Therefore, raising cash reserves now rather than hoping the downside barrier holds looks like the best strategy – for potential buying opportunities as well as peace of mind.

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