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Stock market highlights

Heavy selling has been a characteristic of the U.S. equity markets for longer than many investors might realize. Today is no exception.

Charts for three stocks are shown below. A picture tells the story, revealing how downside power persists. The primary reason for heavy selling has been unacceptable earnings growth.

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Unbiased independent market analysis for investors who manage their own portfolio.


How to use stock research

Investors and advisors use stock research to gain an understanding of a publicly traded company. Extensive examination of a company has been used for decades to serve investors in stock picking. But if using research reports for stocks is the right approach, then why isn’t it working better?

The most significant users of research reports is the investment industry itself. Investment Advisors routinely access research from multiple sources and use the research to form an opinion. Their opinion is the basis for a pitch to a client for a stock buy. But the problem is, it’s just an opinion and even if it’s good analysis, it doesn’t mean the stock buy is good timing. It’s essentially another form of speculation even though it is intended to avoid speculation. What matters in the stock market is timing and research reports rarely address stock behaviours and the market in general.

Almost all research reports are buy recommendations. It’s rare to find research describing why a stock is a sell. But if research was objective, there would be more stock coverage with a sell. Since 80% of all stocks fail to perform to the same degree as the top 20%, this should be the case, but it isn’t even close.

Advisors at large investment dealers satisfy the regulators by recommending stocks in big companies with research from their own firm. But does this work for investors? The research and the stock picks lack variety, objectivity and a thorough analysis of alternatives.

Research Reports Fail To Deliver

If investors want their portfolio to succeed, they’d be better off ignoring most research reports. Our studies have shown that the most significant fundamental measure in the stock market is earnings and sales growth. That information takes only minutes to determine and it’s free. Other fundamental measures have not proven to be significant enough to impact the stock screening process.

Since 2012, earnings and sales growth has been profoundly important for avoiding down trends in most stocks. But other indicators have been the key to picking stocks for outperformance.

Avoiding research reports helps investors maintain objectivity in order to target factors that matter in the management of a stock portfolio.


Unbiased independent market analysis for investors who want to know how to do better.

Stock selling rampant

Until recently, most stock averages had been going higher. But heavy selling has been hitting many stocks for months and it's becoming rampant.

Three examples are provided below showing the last six months of price and volume action from their stock charts. It would be easy to dismiss this as just one day in the market, but it hasn't been unusual. Investors may follow the selling on a day by day basis, as our research does, using data lists such as the percentage and price decliners lists.

The decliners list for August 6, 2014 is directly below. There are a considerable number of better quality company stocks suffering large losses. Compare it to the gainers lists and a significant aberration is obvious.




Unbiased independent market analysis with strategies and execution tips for investors.

How to lose even more money in the stock market

It’s easy to lose money in the stock market. Every investor has their own way of doing it, but some have mastered a special technique. It’s using the strategy of loading up a portfolio with the worst performing stocks.

Not every big loser starts out that way. Many stocks are great but eventually their time runs out and selling becomes the norm. The stock market can be great for profiting from big winners but there’s a trap that some investors fall into with these stocks.  

So what’s the trap?

Consider the following about the stock market. Realistically, most publicly traded companies are successful companies. It’s hard to generate hundreds of millions, or billions, of dollars in sales and earnings if the underlying business is a mess. It’s why we invest in the stock market. Big investors know this, but a change in appetite for a stock or the market generally, shapes a down trend that has ruined many investor portfolios and psyches.

The problem starts when an investor rationalizes the great company they invested in should be held during down trends. Unfortunately, the problem will be applied to most stock purchases, adding another loser to the portfolio one after another. Eventually, the portfolio is swamped by big losses in nearly every holding.

Corrections and bear markets are the death of a portfolio if capital is exposed to down trends. Since most stocks follow the trend, the emphasis needs to be on mastering the market, not judging corporations.

150 years of evidence tells us the following about stocks

Stocks that fall by 40% or more are no longer in favor with big investors. Those stocks may bottom out and recover, but they are inferior choices as other stocks undergo heavier buying on a relative basis.  

  • Most of the market’s greatest winners become average stocks, at best, following a break in their long term up trend.  
  • New sectors and stocks become the big winners in new bull markets. It’s not uncommon for a complete change in leadership from one rally to the next within the same bull market.  

There are two strategies we suggest to investors that supports successful management of a growth portfolio.

1.       Sell any purchase that is below the purchase price, before the loss gets large.

2.       Sell any stock or E.T.F. that has triggered a sell signal. In layman’s terms, sell anything that is no longer going higher when the evidence is sufficient to render this conclusion. It works and it works well.  

Knowing what constitutes a sell signal is paramount to good timing in the stock market. Executing sells of stocks and E.T.F.'s, without subjective interference, is the hallmark of a successful investor.


Unbiased independent market analysis with strategies and execution tips for investors who want to know what works in good and bad markets.

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Commentary including ideas, historical and other market indications are not investment advice. Statistics and other data may be from other sources and may be inaccurate or incomplete. See Full Disclaimer.

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