Customer Service 1 (888) 261-2693
Advanced Search

A Simple System for Buying Stocks

By Jeff Clark
Tuesday, January 29, 2013

If you weren't willing to buy stocks three months ago, you shouldn't be buying them today.
 
Three months ago, the S&P 500 Index was trading at 1,360. It was down 7% from its mid-September high. And less than 25% of stocks were trading above their 50-day moving average (DMA).
 
In other words... stocks were on sale. Shoppers could find plenty of bargains.
 
On Friday, the S&P closed above 1,500 for the first time in five years. It's up 5% just for the month of January. And now, 92% of stocks are trading above their 50-DMA.
 
Outside of precious metals, it's hard to find any bargains today... Yet shoppers are rushing into the market to pay full price.
 
That's a mistake.
 
I'm not saying stocks will fall from here or that today's investors can't make money. But there's a good time and a bad time to buy stocks – just like there's a good time and a bad time to buy skis, swimsuits, and lawnmowers.  
 
We have the opposite condition in the stock market today. Take a look at this chart showing the percentage of S&P 500 stocks trading above their 50-DMA...
 
Percent of S&P 500 Stocks Above Their 50-DMA
 
The blue circles on the chart indicate when less than 25% of stocks were trading above their 50-DMA. The red circles show when more than 80% of stocks were above their 50-DMA.
 
Here's how that chart lines up with the action in the S&P 500...
 
The S&P 500 Large Cap Index
 
As you can see, anyone who bought stocks in the previous red circles – and held through the declines – is still making money today. But you can do far better by simply waiting for the blue circles.
 
Like I said earlier... anyone buying today can still make money. But you'll do far better if you follow this simple system and wait until less than 25% of stocks are trading above their 50-DMA before aggressively jumping into the stock market.
 
Best regards and good trading, 
 
Jeff Clark 




Further Reading:

There aren't many bargains in the stock market today. But one precious metal is setting up for a terrific trade from a risk/reward standpoint. Jeff says it has about $1.50 of downside versus more than $10 of potential upside. Get the full story here: The One Precious Metal I'm Buying Today.

In The Daily Crux
Market Notes
The broad S&P 500 Index is up more than 5% already in 2013.  
 
Small-Cap Russell 2000 Index hits a new all-time high.
 
Palladium prices break out to a 16-month high.
 
Garbage collectors Waste Management and Republic Services touch fresh 52-week highs.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1553.28 -0.4% +11.1%
Oil (USO) 33.28 -0.3% -15.2%
Gold (GLD) 152.81 +1.7% -3.5%
Silver (SLV) 26.39 +1.5% -14.1%
U.S. Dollar 82.75 +0.2% +3.4%
Euro 1.30 +0.5% -0.5%
Volatility (^VIX) 13.92 +0.2% -16.7%
Gold Stocks (^HUI) 328.04 -0.8% -25.6%
10-Year Yield 1.69 -4.0% -22.1%

World ETFs
Symbol Price
Change
52-Wk
Singapore (EWS) 13.89 -0.2% +14.3%
Japan (EWJ) 10.96 +0.6% +13.8%
USA (SPY) 155.16 -0.5% +13.5%
Israel (ISL) 14.25 +0.4% +7.4%
Taiwan (EWT) 13.28 -0.4% +4.4%
India (IFN) 20.49 -0.4% +2.7%
Canada (EWC) 27.54 -0.6% +1.6%
China (FXI) 35.64 -0.9% -1.1%
S. Africa (EZA) 62.45 -0.1% -3.3%
Lat.America (ILF) 42.94 +1.0% -5.8%
S. Korea (EWY) 55.77 -1.9% -7.0%
Russia (TRF) 14.50 +0.2% -9.9%

Sector ETFs
Symbol Price
Change
52-Wk
Construction (PKB) 19.43 +0.6% +41.6%
Media (PBS) 19.16 +0.2% +29.7%
Health Care (IYH) 97.00 -0.7% +26.2%
Consumer Svcs (IYC) 97.18 -0.3% +22.2%
Real Estate (IYR) 70.72 +0.3% +19.4%
Water (PHO) 22.25 -0.5% +18.8%
Financials (IYF) 67.22 -0.3% +18.4%
Insurance (PIC) 19.01 +0.1% +18.3%
Utilities (XLU) 39.57 +0.4% +18.0%
Defense (PPA) 22.74 +0.1% +17.1%
Transportation (IYT) 107.34 +0.5% +15.4%
Biotech (PBE) 26.03 -0.4% +15.2%
Telecom (IYZ) 24.71 +0.7% +15.1%
Industrials (IYJ) 79.84 -0.2% +15.0%
Retail (PMR) 27.33 +0.3% +8.9%
Software (PSJ) 29.07 -1.3% +8.9%
Nanotech (PXN) 6.48 +0.0% +2.9%
Big Tech (QQQQ) 67.86 -0.8% +1.5%
Basic Mat (IYM) 68.04 -0.4% +0.5%
Semis (PSI) 14.84 -0.6% -4.4%
Alt. Energy (PBW) 4.20 -0.2% -17.2%

Recent Articles