Assessing Risk

Right now the market is on edge over these “bubble stocks.” The indices do not show the stress, but it is there. Truth be told, these bubble stocks are alluring because of the amount of selling that has taken place in them over the past 3 months. We’ve been programmed to believe “all will be well” and whatever sold off will come back. I do believe this time is different, but the same, however. It’s different in that FEYE and SPLK are not coming back, not for years anyway. It’s the same because we’ve seen bubbles pop before (2000, 2008) and the process is something to keep in your memory.

When assessing risk, first, I look to the leaders: AAPL, QCOM, SNDK, MSFT and GOOG. If those are doing alright, I move on up the risk ladder. Stocks like TWTR, FB, MU and Z come to mind.

If those are doing well, I then travel inside of the sewers to see what the rats are doing. Names like CRTO, FEYE, CSLT, SPLK and CRCM come to mind. If you happen to work for one of these rat infested companies, I feel for you. Your jobs are woefully insecure and your stock options are under-water. You pretty much have nothing to look forward to and your CEO is a loser. That being said, everyone should be assessing risk, at all times, in order to get a feel for the market.

Are you investing in your trading business or winging it? Not to toot my own horn, but the services of The PPT, 12631 and After Hours with Option Addict are of immense value and will help novices and experts alike in trying to decode this junkyard of a market.

For example, right now overall market breadth is at 38%, a paltry number.

However, if I were to look under the hood and examine breadth on an industry by industry basis, a tool available in The PPT, I see that Banks, Machinery Tools, Automakers, Auto-dealerships, Airlines and Semiconductors are all strong. Couple that with the fact that biotech looks to be finding a floor here and TWTR is actually up, I’d say there is a good chance this market firms up soon and sprints higher into the bell.