When the big stock market indexes take a quick big dive – the natural instinct for many is to flee.
And this comes particularly as the big indexes including the Dow Jones Industrial, S&P 500 and Nasdaq Composite drop by more than 1.00%.
But I want to take a moment to explain that fleeing can do more harm for you and your portfolio – particularly if you don’t fully have the facts about these indexes.
And in a moment, I’ll show you how my stocks that I present to you and place on my Watch List inside my Traders Daily Direction have a special edge that can keep them away from the mayhem – and even set up great trades for you.
And to get the rundown on my current Watch List stocks.
What Happened & How to Prosper
Stocks opened lower on Thursday thanks to new data on the virus Delta variant.
The Dow gapped down 400 points, and most growth stocks were in the red.
This is the first sign of blood we have seen from the index in a couple months.
But warning signs have been flashing…
Take a look at this chart:
The candlestick chart on bottom is the NASDAQ Composite Index.
Above, the percentage of stocks trading above their 50-day moving average.
As you know, I watch the 50-day to determine the short-term trend.
In a healthy market, the majority of names should be above this level.
At the start of the year, 80% of stocks traded above it.
Today, that number is down to 43%.
So even though the index has drifted higher, the number of stocks in short-term uptrends has come down.
Now don’t get me wrong – this is not a red flag sending me to 100% cash.
But for me, it is a sign to be cautious.
Indexes are market cap weighted.
Large companies like Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL) have a much greater impact on their performance than smaller names.
B. Riley Financial (RILY), one of the stocks on my watchlist, is worth $2 billion.
Apple (AAPL), on the other hand, is worth $2 TRILLION.
So, a 1% move up in AAPL has the same impact on the Nasdaq index as a 1,000% up move in RILY.
In other words, a small handful of stocks dictate the bulk of the index’s move.
I prefer to trade in smaller names.
That’s where I have an edge.
My Big Edge for You
Because I tend to focus on smaller stocks – these are the stocks that can make big, fast moves.
Unfortunately, the performance of small caps can get lost in the index.
That is why I watch the percentage of stocks above the 50-day moving average.
It is a better barometer for the health of the market.
After the virus selloff in March of last year, I waited until 50% of stocks were above their 50-day moving averages to provide confirmation that it was time to get back in.
Hopefully, it will help you as well as that is my goal here at Traders Daily Direction.
Another Edge for You:
I am ramping up my insider stock buying research that is part of my Surge Stock Indicator (SSI). This takes identified buys and then turning to my proprietary technical chart analysis with a focus on under the radar smaller stocks.
I have developed a new product that we’ve just launched here at Traders Agency called Insider Edge. And this is all about one of my common-sense tools that finds stocks with big surges in insiders’ buying their own shares. And in turn, using my chart analysis to find out if the insiders are right about a stock set to surge.
And to get the full rundown on how to profit by buying stocks that insiders are buying right now, you learn more about my Insider Edge at Traders Agency. Click here to watch