Calling The Top

[PICSIX]

The following chart demonstrates how well an ADX peak has been at predicting a complete market reversal in the DJI. Now would be a good time to take a low-risk, long-term short entry.....

After posting, it looks like the chart is a little hard to see...It is a monthly chart beginning in 2006 to current.

[Ocala Mike]

Looks like a nice Head and Shoulders formation in the Dow to me; probably wouldn't want to be long this market any more, but what do I know - I'm a horseplayer!

[reckless]

Originally Posted by Ocala Mike

Looks like a nice Head and Shoulders formation in the Dow to me; probably wouldn't want to be long this market any more, but what do I know - I'm a horseplayer!

You probably know this as well as anyone but for those that might not know this ... the qualities that make for a good horseplayer are also qualities that work well for those that invest in the stock market.

[RaceBookJoe]

nice negative divergence in that chart

[badcompany]

Still bullish, as I have been, here, for well over two years.

See no reason to consider selling long term holdings.

[PICSIX]

Originally Posted by badcompany

Still bullish, as I have been, here, for well over two years.

See no reason to consider selling long term holdings.

Agree as long as the prices of your individual holdings remain above their 10-week moving averages

[reckless]

I sold a ton of stock late today before the close. I will probably regret it but c'est le vie. Some stocks that I sold, Sysco, John Wiley, Fox News, Oracle, Pfizer, Intel, Gannett, plus half of my Hewlett-Packard and Apple are holdings that I have had since 2009-12, and with Pfizer, Apple and Gannett, even longer.

I fortunately made a ton with all of them but I just don't like what I am seeing right now. Companies borrowing by the billions to institute stock buybacks solely to mask slowing sales and profits, big insider selling, the world-wide depression being ignored by the media, oil no where near a bottom, the strong dollar hurting the multi-nationals, the chaos in the geo-political world, world-wide QEs, and much, much more 'sell' signals.

I am not a bear or a doom and gloomer but things just don't jive well with the way I do things. We could be in the beginning of a market and an economic melt down.

[badcompany]

I can understand why investors would want to bail on this market. The last six months haven't exactly been my idea of a good time, from a long term investing standpoint. This type of market can be very tiring.



That's exactly why you shouldn't bail, IMO.

[_______]

Originally Posted by badcompany

I can understand why investors would want to bail on this market. The last six months haven't exactly been my idea of a good time, from a long term investing standpoint. This type of market can be very tiring.



That's exactly why you shouldn't bail, IMO.

Range bound stocks can be very profitable if you are patient and the original thesis for your investment is still valid.

You collect a dividend and reinvest it. Eventually when the stock moves up, you own more of it.

I've never been good at timing the market and don't know of anyone who has done it successfully over a long period.

[badcompany]

Originally Posted by _______

Range bound stocks can be very profitable if you are patient and the original thesis for your investment is still valid.

You collect a dividend and reinvest it. Eventually when the stock moves up, you own more of it.

I've never been good at timing the market and don't know of anyone who has done it successfully over a long period.

My tactic with long term investments, stocks I have no plans to sell, is to reward success. When they make new highs, I buy a little more. The ones that don't move, I begin to liquidate slowly.

With this system, you eventually end up with a good list.

[ReplayRandall]

Originally Posted by badcompany

My tactic with long term investments, stocks I have no plans to sell, is to reward success. When they make new highs, I buy a little more. The ones that don't move, I begin to liquidate slowly.

With this system, you eventually end up with a good list.

This appears counter-intuitive to me, as your cost average per share goes up to it's full maximum. I will notate the new high, and will buy more only when the stock has at least a 5% pull-back from that high, or any further drop......BC, give a little detail on why you buy at a new top, especially in today's over-inflated market......

[badcompany]

Originally Posted by ReplayRandall

This appears counter-intuitive to me, as your cost average per share goes up to it's full maximum. I will notate the new high, and will buy more only when the stock has at least a 5% pull-back from that high, or any further drop......BC, give a little detail on why you buy at a new top, especially in today's over-inflated market......

Every system has its flaws. Buying at new highs does raise the cost per share average, but once a stock is a big winner and the new purchases are a small percentage of the total amount of stock owned, the average only goes up marginally.

The flaw of your system is that you're waiting for an event that might not happen.

Let's say a stock makes a new high @100, and you decide to wait for that 5% pullback before you buy more. There is the possibility that the stock keeps on going up to the point where the 5% pullback price is still higher than the original new high. In this example, the stock could go to 110. A 5% pullback brings the stock price to $104.5.

[ReplayRandall]

Originally Posted by badcompany

Every system has its flaws. Buying at new highs does raise the cost per share average, but once a stock is a big winner and the new purchases are a small percentage of the total amount of stock owned, the average only goes up marginally.

The flaw of your system is that you're waiting for an event that might not happen.

Let's say a stock makes a new high @100, and you decide to wait for that 5% pullback before you buy more. There is the possibility that the stock keeps on going up to the point where the 5% pullback price is still higher than the original new high. In this example, the stock could go to 110. A 5% pullback brings the stock price to $104.5.

Ok, but if the stock goes to 110, aren't you buying more at that new high?

[reckless]

Originally Posted by badcompany

My tactic with long term investments, stocks I have no plans to sell, is to reward success. When they make new highs, I buy a little more. The ones that don't move, I begin to liquidate slowly.

With this system, you eventually end up with a good list.

badcompany, I have my very own criteria for investment as well, but based solely on fundamentals. Just like your work, my system also generates a good list and stock portfolio. And like your above comment, when the companies don't execute or slow down, I begin to liquidate, which I did yesterday--a lot.

The metrics I use are simple, yet I hardly hear them seriously discussed much on CNBC or even read about it much.

I require the following before I buy a stock, in order of importance:

Consistent long term growth in free cash flow.

ROI/ROE, return on investment/equity, that averages 20 per cent, and better, regularly achieved on a consistent, long-term basis.

Price and free cash flow yield (stock price divided by FCF), which are attached at the hip. Depending on the company, 12-15 per cent FCF yield makes for a screaming buy.

Low and nominal debt levels. High debt creates a false ROE signal.

Based on all this, some no-brainer stocks I have owned in the past (and still own in most cases), are well known companies probably not on Jim Cramer's list: Lorillard, Hewlett Packard, Microsoft, Gannett, Pfizer, Lilly, Exelis, Apple and McKesson Corp.

I liquidated close to 75 per cent of all my positions yesterday. Many of these companies ran up so much these past 3-5 years that they don't 'plus out' on all my metrics today. Even Apple now has billions of debt that it didn't have at all just two years ago. Gannett also took on loads of debt these past 4-5 years that it never had, and with all the engineering and Icahn stuff, pushed the stock price to levels that I feel I had to sell into.

As I said yesterday, I am not a doom and gloomer but I think the market is in a precarious place right now, thanks to geo-political turmoil, currency debauchery via QEs, lack of demand and slow economic growth here and especially abroad, the too strong dollar has begun making our multinational companies less competitive, the ruble is this close to cratering, and oil prices will not stop dropping until the Saudis stop their over-producing. And no one knows when that will happen because the Saudis want to kill off all the following: the Russian and Iranian oil industrys, the US natural gas producers, Syria, and even Tesla Motors, by extension.

I probably am going to regret some of this selling, yes, truth be told. But I believe in my opinion that the current geo-political story world-wide will become the story of the 21st century, also hurting stock prices as the economic slow down/recession/depression plays out. The economic and political stories are also attached at the hip.

The future is playing out in front of us right here, right now.

[ReplayRandall]

Spot-on post, Reckless. Nice summary...