Page 490 - How to Make Money in Stocks Trilogy

360 INVESTING LIKE A PROFESSIONAL

We also have relative strength lines, moving average lines, and a line just
below the NYSE Composite chart that displays the New York Stock
Exchange advance-decline line, which let’s you quickly see day by day over
the last six months if more stocks on the NYSE were advancing or declining.
There’s even an Accumulation/Distribution measure showing which of the
major indexes has the largest amount of accumulation. At this reading, the
Nasdaq had a “B–,” meaning it has recently enjoyed stronger accumulation
than the others.
B2 is a page I look at every day, and you should too. I want to carefully
check the recent price and critical volume activity of the leading indexes on
a day-by-day basis to see if they’re still in an uptrend and under accumula-
tion or if they’re shifting into a new downtrend and behaving in a highly neg-
ative way. Don’t neglect the daily volume; it’s the key that can tell you if
something is going wrong. If you study and learn to interpret the general
market indexes correctly, which can take some time, you will learn how to
avoid most of the serious declines because the increased distribution always
shows up in the early stages, before the more damaging part of a decline
evolves. This can preserve a good bit more of your money and is something
it’s definitely worth striving to perfect, no matter how much time it may take
you. How much time, after all, did you spend earning the money you now
hope to invest? So is it worth your time to learn how to skillfully preserve
and protect it?
If you learn to read the market and apply IBD’s general market rules,
there’s no excuse for finding that you are down 30%, 40%, or 50% or more
in any bear market. I know most public investors and maybe some readers
of the paper were possibly hurt in the market correction of 2008. But IBD
supplied the rules and information. If readers did their homework and read
the “The Big Picture” column, they should have seen that IBD’s method
picked up the adverse activity in the earlier stages of the emerging bear
market decline that developed in late 2000 and 2008.

You Can and Must Learn to Spot the Following
October 3, 2007, was the first distribution day on the Nasdaq, October 11
was the second, October 15 and 16 were the third and fourth, and October
19 was the fifth. If you saw and read this correctly, you would have sold
something. On October 24 you had a sixth distribution day, and you should
have cut back further. By November 1, you had seven crucial warnings. This
is how all important market corrections and bear markets begin. If you
missed this and were totally unaware of what was happening, go back and
study all the market-top charts in Chapter 9 until they make sense to you
and you understand what you must look for in the future. Many investors