Stock Market Leaders?

By: ShortMeTina

Stock Market Leaders, where are they?  One of my very first blogs since starting shortmetina.com discussed the need to pay attention to the overall markets, at all times.  It’s important to know what the overall market is doing because that should dictate the direction in which you trade.  For example, if we are in a bull market, you want to be net long in your trading portfolio.  Meaning, when the market is going up, most of your trades should be on the long side.  The opposite holds true.  When the market is bearish, most of your trades should be on the short side.  Again, it’s super important to know where the market is going because, wherever the stock market goes, so goes your stocks.

I hope this is clear.  I hope I’ve been consistent in my message. 

Outside of monitoring the overall markets (SPX, DOW, NASDAQ, RUS) for direction, you can also get a state of the stock market by following the market’s current leaders.  For us, our stock market leaders are:

Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet aka Google (GOOGL) or as Jim Cramer famously coined them, “FANG”. 

So where are our stock market leaders?  What are our FANG stocks up to?

At the time of this publication;

Facebook (FB) is currently ~5% off its highs.
Apple (AAPL) is currently ~5% off its highs.
Amazon (AMZN) is currently ~12% off its highs.
Netflix (NFLX) is currently ~14% off its highs.
Google (GOOGL) is currently ~9% off its highs.

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So while the SPY (S&P 500) is only about 2% off its highs; our market leaders (FANG) are in correction territory or approaching correction territory. 

Moreover, you have an imbalance of stocks making 52 week highs (50) vs. 52 week lows (189). 

I say all this to say, the market may be topping out.  I spoke about my price target last year, read here for more information. 
 
What can you do to protect your portfolio in the event the entire market corrects or enters bear market territory (a decline of 20+%)?

Well...
You can remain 100% in cash.
Buy defensive stocks such as Utilities (XLU) or Gold (GLD). 
Or you can short stocks with poor fundamentals and/or stocks showing technical ‘sell’ signals. 
 
I also think it’s a good idea to make a list of stocks you want to own and gradually purchase them when they are 10-20+% off their highs.

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That’s all.  The overall point of this blog was to suggest that you:

1. Pay attention to the overall stock market because it will dictate the direction in which you should trade.
2. Pay attention to your market leaders because they signal where the stock market is heading.
   
3. Position yourself via cash, defensive stocks, and/or short positions to protect your trading capital and
4. Make a list of stocks you want to own. 

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Good, Bad or Ugly comment below. 

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