Market Not What It Seems…

Hey Market Pilot,

I’m having trouble finding good names to trade.

Poor breadth is probably the reason. I’m looking at how many stocks are over moving averages such as their 20, 50, or 200 daily simple moving average (SMA). This reveal the current condition of the market beneath what the index says.

Right now, I believe the indexes are masking what is really happening out there due to how the indexes are weighted.

Weighting means that an index like the S&P 500 (SPY) or the Nasdaq (QQQ) can be moved by a few large names. One stat to consider is over the last six months, four stocks (Microsoft, Apple, Nvidia, and Google) have generated almost 70% of returns in theS&P 500. On its own, this may not be too bad as long as most of the rest of the market is riding the wave, too. 

But if we look at another view, we start to see a different picture. Pictured below is a screenshot of well-known tickers and how far below their highs they are:

This is pretty revealing and what it says to me is that there are a ton of major names not participating in this market. And how this translates to our trading is that good, strong opportunities are scarce, or we need to trade the short side.

Your Profit Pilot, TG


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