There is nothing I can write to do justice to the trading that has unfolded over recent months: wholesale, rampant distribution, outright institutional liquidation. The US Government, my golly, THE GOVERNMENT has invested TAX PAYER money to prop up stocks. The market has reacted with one of the most violent crashes, yes, CRASHES, modern markets have ever seen.
I have stared wide-eyed at violent down then up then down swings on nauseating volume. Then I have gone about my business safe in the knowledge that I have almost no skin in the game. As a stock trader of ten years now, I am humbled to watch the numbers printed by the market, seriously, DOW 8000, RIMM $50? I am wise enough not to get heavily involved and keep my largely cash position.
I can only imagine the fortunes being earned by savvy short sellers and volatility players. For the most part, I am a follower of William O’Neil’s CAN SLIM™, cash is the only place for me to be right now. The major averages had followed through on October 15 only to be met with heavy selling pressure since then. Not a good sign.
Without confirmation from some type of glamour leadership, follow through days are moot. And on this front, one can be confident that there is absolutely none.
The only stock I am personally watching is Alexion Pharmaceuticals (ALXN). I own a small position in ALXN. Alexion is an inspiring small drug company that has won approval to sell its Soliris drug in the <st1:country-region w:st="on"> US </st1:country-region> and <st1:place w:st="on"> Western Europe </st1:place> . EPS numbers for the most recent quarter increased from a loss of $0.28 a year ago to $0.29. EPS growth estimates for coming quarters are 135% and 283%. ALXN’s relative strength compared to the S&P500 is impressive. I believe the stock still has more base building to put in before it could set up a sound buy point and move significantly higher.
Conditions required for a strong bull market include a sizeable group of outstanding speculative glamour companies powering to new highs. Until these conditions return, wise investors will be largely or wholly in cash. A large change in trend is not close at hand.
Disclosure: Long ALXN