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.
[ad#Google Adsense 336×280-IA]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…
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…
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,
Source: The Growth Stock Wire