At the heart of my approach to the stock market is my belief that it is better to react to shifting price action rather than try to predict what might happen. I not only avoid trying to predict where the market might be weeks from now but I actively avoid even thinking about it very much.
My goal is to watch the price action and how things are developing and to make decisions based on that. If I’m wrong, I try to cut my losses quickly and regroup.
Currently, the market has been undergoing a correction. It started in early September and has created some good volatility. The market has needed to correct, and the fact that it is doing it during the traditionally weakest time of the year seems like a pretty good technical setup for the fourth quarter.
In addition, the recent corrective action has helped to close the gulf in performance between big-caps and indices on the one hand and small-caps and secondary stocks on the other. Much of the market has been in a bear market since February, but we would never know it based on the coverage in the business media. The recent weakness has helped to cure this inconsistency to some degree.
Third-quarter earnings are coming up soon, and that coincides with more positive seasonality. With many of my favored names coming off multi-month lows, I believe there will be some positive price action as the focus shifts to valuations and numbers.
My focus right now is finding those stocks that should see positive news in the next month or so. The technical conditions combined with the news should produce some good upward movement. I will continue to discuss stocks like urban-gro (UGRO) , Butterfly Network (BFLY) , and others that I think will have some positive news flow.
I could easily be wrong about what will unfold, and I’m sure I will be at least in part, but that is my current plan.