It seems odd to mention this since the Market Indices are hovering near their 52 week high and the percentage gain for the S&P 500 Friday was the strongest in months. However, if you are a growth stock investor, this may be a good time to examine your holdings. The market has exhibited some subtle but concerning action as of late. There have been days of heavy selling matched with high volume (the amount of Shares traded). When this occurs, it is an indication that Institutions (e.g. Mutual Funds) are selling. Up days, for the market, recently, have coincided with uninspiring volume, illustrating a lack of Institutional conviction. Institutions control Market direction, not individual investors.
I prefer using a Chart of the Nasdaq to determine market health since it trades over 3000 companies vs. the 30 Companies that trade on the Dow. In theory, this should provide a superior overall outlook.
Reviewing your own holdings, examine the price and the volume for overall health. As an individual investor you have the ability to act quickly. When a Mutual Fund wants to establish or reduce a position in a Stock they do not have this advantage. If a fund manager has a company he/she is interested in, by the time they complete their purchase, they will own Tens or likely Hundreds of Thousands of Shares. They cannot buy or sell all these shares at one time, they have to build into or scale out at measured pace. Now if you have multiple funds taking the same action in a particular stock, this buying/selling power will leave "huge footprints" in the form of very discernible price and volume action on the Company’s Stock Chart. If their exodus is on display in any of your holdings and you do not have a large profit cushion, it becomes decision time.
Keep in mind I am an Insurance Man, not a Financial Consultant so take or leave this as you see fit. The beauty of a modifiable Blog, with low (or possibly zero) readership, is that if I am wrong, I will simply change the tone several weeks from now then encourage discussions of my Prophetic Stock Market genius.
Recommended read for Individual Investors:
For growth investors, arguably the best book written on the subject is "How to Make Money in Stocks" by William J. O’Neil. O'Neil is also the Founder of "Investors Business Daily" www.investors.com
Posted by Dan Hebbeln: dan@hebbeln-ins.com