Market Warning Signals Are Increasing – Some Individual Stock Observations

by Olivier on March 19, 2010

There are several ways to try to get a grip on market internals. You can analyze all sorts of indicators measuring new highs, new lows, breadth, sentiment etc. I like to measure the market’s health observing individual stocks and monitoring if they meet my expectations or if they don’t. Here’s a list of stuff I noticed going through the charts that I consider ‘warning signals’. I don’t think we are going to see anything like a crash here, markets are simply too strong. But it is a sign for me to be very cautious on the long side right now.

  • BIDU – Baidu: The stock has put in a really ugly and very bearish weekly reversal candle with a long tail. First signs of a possible topping process. Talking about China, Paul van Eeden was on BNN talking about the risks in China. Excellent video interview.
  • ANO – Anooraq Resources: Platinum and Palladium show some signs of possibly being in a stealth bull market. ANO displayed lots of weakness today.
  • ELR.TO – Eastern Platinum: Same as with ANO. Stock put in a down day possibly reversing the recent breakout to the upside.
  • SMF.TO – Semafo: The stock has no overhead resistance with clear sky potential. Instead of exploding to the upside the stock gets sold off. No follow through to the upside.
  • BEV.TO – Bennett Environmental: One of the stellar performers on the Canadian TSX Exchange. The stock’s volatility has gone insane over the last few days. Volume is exploding as well. This is a classic sign of distribution.
  • CRK.TO – Crocodile Gold: A gold mining stock that was showing a promising potentially bullish wedge chart pattern. The stock can’t move up to the upside. The chart tells me something might be wrong with that one. It somehow doesn’t feel right. As indicated in my chart annotations I wouldn’t touch this one until it can take out 2.20.

Lots of signs with individual stocks that we might be witnessing the first signs of distribution and the beginning of a correction or a sideways movement. This is the market’s way of telling me to be very cautious. I listen to the markets and for now I am staying on the sidelines. The ‘ultimate indicator’ to watch though is a very simple one:

  • Is your overall portfolio trading in accordance with the market indices?
  • Is your overall portfolio performance in line with your expectations?

If it is not, you need to make changes to your market exposure.

For to win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill. – Sun Tzu

Have a great evening!

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