May Brings A New Short-Term Downtrend

I mentioned earlier that the choppy market might be an indication of a larger topping process, but I should now mention that it is unlikely that the market forms a major market top without a significant number of new 52-week lows. 

In other words, at this moment, this chart tells me that the larger market uptrend is not under pressure and that we have just another short-term market oscillation, of which there are usually six or so per year. 

However, and this is really important, I am keeping an eye on this chart because, over the last three months, the trend for the level of Nasdaq new 52-week lows has been elevated and could be indicating a problem. It was just a couple weeks ago that there were way too many Nasdaq new lows. Eyes need to be open here.

Below I am showing you (and reminding myself) why I think there are usually at least six short-term buying opportunities in any 12-month period of time. If you go back over time, most 12-month periods look a lot like this. There are a few exceptions, one of which was 2006 which I described last week.

Yesterday I was in my car for a couple of hours, which is a really long drive for me, and I used the opportunity to listen to Jesse Livermore's early 20th-century book about trading. He warns against overtrading, of which I have been a bit guilty lately, and he says that there are usually about four really good opportunities to buy stocks in any year, and if you are patient and take advantage of this timing, then it is a cure for overtrading. 

Livermore believed that over-trading hurts results and is the result of impatience and lack of preparation, and that all that frequent trading does is define pivot points on the chart for more disciplined traders to profit from. That definitely put me in my place as a too-frequent trader, but also reassured me that the method I describe every week of using short-term cycles to buy stocks is the right method for me. At the moment, because of Livermore's comments, I am feeling even more committed to this strategy of buying at the lows of the short-term cycle.

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Disclaimer: I am not a registered investment adviser. My comments reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, sell, ...

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