Be Wary of the Wise

I can tell you now, I have no idea whether the stock market will up (or down) tomorrow or next week and the same reasoning applies to individual stocks. The best judge is by watching the price and volume action for hints which will put the odds in your favor. Of course even that can be wrong since a stock can change direction at any time, even after your research suggests the opposite. People look to the ‘experts’ for direction and picks but that is a misguided outlook. When you watch financial programs for every stock recommendation up there will be an equal recommendation that the same stock will go down. For every analyst that says the Dow will climb, another analyst will say it will fall. Some hedge their bets so they are right in both directions by saying they are short term negative but long term positive. Some will say buy a little now and buy more on weakness, again they are right regardless of direction, lets hope it doesn’t continue down after buying more.


Opinions are worthless which of course includes mine. When I mention a stock I am only selecting stocks on an ‘odds favor’ basis. I use a statistical approach with very careful money management because I know that however good a pick may be when the indexes fall then the very best of stocks will also fall. It is a fact that 90% of all stocks will fall in a bad market. For this reason you must always use money management techniques. In fact I would say money management is far more important than stocks picking. With good money management skills you can make money even if you buy bad stocks, the reason being even bad stocks can go up in a good market. Since we are now in a down trend which could end who knows when, maybe now would be a good time to review the rules I outlined as a refresher in early January.

Many readers are looking for me to mention stocks that they can add to a watch list for possible later purchase. I cannot do that since I know 90% of all stocks will fall in a down market. Better to look for stocks making new highs soon after a market down turn ends, because the stocks making new highs first are the truly powerful stocks. The stocks making new highs early after a market fall clearly didn’t fall as much to be making new highs so early. They do that for a reason and are the ones to buy if they break out on volume.