As the old saying goes, “A rising tide raises ALL boats”, but bewarebecause the reverse is also true. Since April 23rd, the tide has beenheading out and the majority of stocks as well as our solar stocks arebeing swept down with the flow.
The market is in the midst of giving us our first significantcorrection (greater than 10%) since this bull market startedin March of 2009. The underlying technical indicators I follow arestill holding up, but for the first time they aresignaling caution. In the next few weeks we will seeif this is the 10% correction we were looking for in the natural courseof a market cycle or the beginning of something worse.
As I said last earlier this month:
“The market has NOT had a correction of 10% or greater since Marchof 2009. Why is that significant? It is significant because there hasNEVER been a bull market in the last 80 years that has NOT had at leastone 10% correction BEFORE it topped out (Credit: Invest TechResearch). As a result, it is likely (from an historicalstatistical point of view) that we will have at least one 10%correction and then another move upward before the end of this bullmarket. Historically a lot of money has been lefton the table after the first 10% correction, if you sold out too soonand did not give the market a chance to run its course”.
This is not to say that things cannot get significantly worse fromhere, but the historical odds are overwhelming stacked in favor of themarket turning around and heading off to another high this year beforeanything truly serious occurs. But it is without question a time to bealert and to at least lighten up on weaker stocks and prepare to movequickly on the balance if conditions get worse.
If we look at the current market situation, and relate it to solarrelated stocks, it is a combination of a higher risk overall stockmarket and a solar stock sector that has been weak and is gettingweaker. Given these odds this certainly is NOT a time to be buying solar stocks, unless you are a pure trader who can move in and out of stocksdaily. It is not a good idea, in a declining market, to establish newpositions especially in one of the weakest market sectors.
Every solar stock we follow is currently trading close to or belowits 50 day moving averagetherefore it is possible some of the stronger solar stocks may rallyfrom this “oversold” position. But once again, you have to be a traderto profit from this current situation.
Below is a chart of what the market and solar stocks have donesince the beginning of 2010 and it is not a pretty sight. Solar stocksare down close to 10 fold greater when compared to the major indexes and are among the weakest of all the industry groups.
Solar Stocks Year to Date 2010
|Stock Symbol||Current Price||$Change YTD||%Change YTD|
Many times I get the sense that investors are afraid, that if theydelay, they will miss the chance to profit from the solar industriesbright future. This is NOT true. There will be plenty of time and manyadvances and declines in the future. Be patient, look for both themarket and the solar sector to be more positive and try not to get swept up in the crowd, because the crowd is always wrong.
Never forget the two investment rules of the great Warren Buffet,one of the greatest investors of our time:
- Never lose money
- Never forget rule #1.