Fitz in Five – August 17, 2023

by DAN
This is Dan Fitzpatrick at StockMarketMentor.com, and it has been one heck of a day.

We’ve got the S&P ( INDEXSP: .INX ) breaking down pretty well here. My suspicion is, it has further to go. Similarly, with the Nasdaq ( NASDAQ: QQQ ), this isn’t a “buy the dip”. If you buy the dip you are going to get ripped, it is just not going to work out for you. The same thing here with the Composite ( INDEXNASDAQ: .IXIC ).

I will just say it, there is always an exception to the rule, but I am not talking about the exceptions. If you are buying right now you are going against the grain. You are kind of, like, standing behind a dump truck with your arms open, waiting for the nuggets that are coming out the back, it is not going to work out for you.

Now, we’ve got the Composite ( INDEXNASDAQ: .IXIC ) compared against all of these, SPDR ( NYSEARCA: SPY ), Apple ( NASDAQ: AAPL ), Meta ( NASDAQ: META ), Microsoft ( NASDAQ: MSFT ), etcetera, etcetera, all of these. You can see that everything is moving down, right? The Nasdaq Composite ( INDEXNASDAQ: .IXIC ) is really moving down a lot.

But this is the point that I really want to make, this (T2108) is the percentage of listed stocks that are above their 40-day moving average, and these are all these wonderful Mega Cap companies. Well, while these guys were going higher, we’ve got the breadth indicator moving higher as well until this was above 75.00.

I can’t recall seeing it ever above 80.00, but when it gets up this high it just can’t go that much farther. At some point, you know you are going to get some kind of a pullback. Whether that pullback is a bonafide correction, we are only going to know that after it takes place. We just know that things are getting pretty frothy when, virtually, everything is above its respective 40-day moving average.

To me, what was instructive is, you see how this is moving up here. And then at some point, right here, this runs lower, right about the same time as all of these are falling. You can see here, Microsoft ( NASDAQ: MSFT ) has already taken a big fall, right? And then finally, this thing just really, really starts to pick up the pace and now we are here.

This is what I know, I know that you are never going to see a chart like this, you are just not going to see it. You are going to see, perhaps, lower prices, I don’t know, lower numbers here on this reading, on this breadth indicator, maybe it will get a little bit lower. Of course, at some point, they are going to reach a point where it’s time to be buying them. We are not quite there yet, but the point is, this is not the time to be buying.

If you want to look at the longer-term moving average you will see the same thing. It is down well below 50.00, 50.00 that had been enjoying this for quite a while here. But now, this is below 50.00 and moving lower, and this is the longer-term moving average. Don’t let all the squiggly lines really confuse you. Just think about it in this respect, up is good, down is bad. Up really, really super, super high, and fast is great for you right now, but probably not that great tomorrow.

When you think about it, this really isn’t that hard to figure out, as long as you don’t have some kind of bias. As long as you don’t have a particular opinion set in stone, I know the market is going higher. I know the market is wrong in selling Mastercard ( NYSE: MA ) or Microsoft ( NASDAQ: MSFT ), or whatever it is. I know the market is wrong so I am buying that stock. You have to give way to the signals that the market is telling you because that is how you make money.

One of the things that I am really keying on is, MicroStrategy ( NASDAQ: MSTR ), we got into this stock at 328.10 and we were setting stops all along the way, and taking partial profits all along the way. I think our final exodus was 426.00, if I am not mistaken. But this is how you ride trends like this.

The same thing here with MARA ( NASDAQ: MARA ), which was an awesome trading vehicle for us. People made a lot of gains on this stock, but at some point, the stock has to go bye, bye, you have to say good-bye and we hit that point at 16.40. When you are trading you don’t trade the ticker. You don’t fall in love with a particular stock.

The point is, you don’t want to be falling in love with a ticker, fall in love with a chart, fall in love with a chart pattern. If you fall in love with a chart pattern, you are never going to have a bad relationship. Because you know when the time comes to ditch your lover, like, I love this chart pattern. I love it, love it, love it, love it. And then at some point, you say, Well, maybe it’s time for us to move on.

And then you are on to the next deal, you are not thinking about Marathon ( NASDAQ: MARA ). You are not thinking about MicroStrategy ( NASDAQ: MSTR ). You are not thinking about NVIDIA ( NASDAQ: NVDA ), Google ( NASDAQ: GOOGL ), Meta ( NASDAQ: META ), or Microsoft ( NASDAQ: MSFT ). You are not thinking about any of that.

If you look at this stock right now, is this a stock that you would want to buy? No, but some of you, if I told you, Oh yeah, but it’s Microsoft ( NASDAQ: MSFT ), yeah that’s a good company. So it is important for you to trade what you see, not what you like.

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