| Original Message |
joeaaron
Posted Aug 17, 2005 8:14 PM
one thing i look at when determining what kind of market we're in is: i watch the "leading stocks." william o'neil says that when the overall market is about to drop that "leading stocks" will go down first also, "leading stocks" tend to rise first when the market turns bullish.
so... what are "leading stocks?" according to o'neil these are stocks with top fundamentals - the IBD 100 index would be leading stocks. every week i put the ibd 100 stocks into a folder at stockcharts.com & i watch them. usually when i buy stocks long i pick from this group. but when it seems the market is under selling pressure i look at these stocks to see if they're falling. i used to watch moving averages but now i watch weekly parabolic SAR dots to determine if a stock is moving up or down.
when 10 to 15 "leading stocks" go bearish according to the p. SAR dots i take that as an early warning sign for the overall market. as of today there are 24 bearish SAR dots on "leading stocks"! 19 of them occured within the past two weeks (many went bearish TODAY.)
this alone doesn't necessairly mean much - but this along with a very bearish COT makes me think that; not only are we in a bearish environment, but the market may be starting to turn now. the COT is not a great timing indicator... but watching leading stocks is pretty good - (no flawless, but good).
personally, i will not be adding to my long positions (except for some oil stocks) & i have recently been dumping my current longs. this is not advice... just some thoughts.
-ja
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