Miserable market action continues Tuesday morning as oil hits its highest levels of the year, housing starts fall short of forecasts, bond yields continue to rise, the Canadian Consumer Price Index is higher than expected and concerns are growing about the strength of the market. the economy.
Technically, the S&P 500 is at its lowest level since August 28, and the other indexes are all trading below key moving averages. The Russell 2000 fund (IWM) continues its deplorable action, reaching levels last seen on July 6. Small caps have been lagging for some time, which is reflected in very low magnitude. The magnitude is about three to five negatives, but I’m watching to see if the number of new 12-month lows continues to rise. Currently they are at 250, but reached 350 on Monday.
Sales are picking up as I write this article and I see few good opportunities other than a groundfish stock which I describe below. The Nasdaq 100 Index is now negative four to one and all major large-cap tech names are in negative territory.
My plan for this market is to have a clear watchlist of 25-30 stocks and monitor them closely as they react to poor market conditions. Many stocks should rebound when the market improves and fundamentals matter, but just because they seem poorly priced in this poor market doesn’t mean it’s a good time to buy them.
The key to fishing bottom stocks in a bad market is to avoid the tendency to try to time the exact low. When you focus on this, you are much more likely to start buying too soon and too quickly. The best approach is to wait for clear support to firm up and then look for rebounds. This support will be the obvious stopping point and will prevent you from continuing your momentum in the wrong direction.
There is a strong temptation to buy into a decline in the hopes of bouncing back quickly. This can work when the sale is intense enough, but it’s not easy to implement consistently.
One stock that I consider to be a bottom fish is AST SpaceMobile (ASTS). The stock has scraped the bottom of the barrel for several months and climbed today on the announcement of the establishment of a 5G connection between a satellite and an unmodified smartphone. This stock has been a major disappointment for loyal retail investors, but it might finally have a chance to rebound a bit now that it has some technical support and some news.
(Please note that due to factors such as low market capitalization and/or insufficient public float, we consider ASTS to be a small cap stock. You should be aware that these stocks are subject to more risks than stocks larger companies, including greater volatility, less liquidity and less publicly available information, and that publications such as this may have an effect on their stock prices.)
