Investors Don’t Have 9 Lives, So Stop Chasing Dead-Count Bounces in Hot Stocks Like Broadcom

Every 3% or 5% single-day pop in technology stocks and high-beta market darlings is being hailed by retail momentum chasers as the definitive return of the bull market. I'm a natural skeptic, hardened by decades of seeing markets cycle up and down. And I just don't see the bull market returning in force for a while… and maybe a long, long while.

To be clear, it doesn't prompt me to "exit the market," no more than it would prompt me to "pile into stocks" when the coast looks clearer. To me, investing in the stock market is never about "do I" or "don't I." It is always about "how much do I allocate?"

Here are three charts to explain further what I see and why I see "dead cats" everywhere.

The Wall Street phrase "dead cat bounce" has been around for decades, likely derived from a phrase that says "even a dead cat will bounce if it falls from a great height."

These three charts illustrate that in varying forms, supporting my belief that we are in a "sell the rips" climate, not a "buy the dips" climate.

Broadcom (AVGO) was a very cool cat for a while as part of the AI mania trade. Now, it has cooled off. And that percentage price oscillator (PPO) at the bottom of this chart indicates fading momentum. Lower lows, lower highs. That's a pattern which started innocently enough back in June. But dip-buyers are now 30% down from that peak.

Next up is Advanced Micro Devices (AMD). Or should I say, next down? A different look, merely because it appears to be at an earlier stage of its decline. Since its July high, I can see no less than seven "pops" higher. That includes the last one, which actually rallied above the previous short-term high.

But again, PPO at bottom has been telling the story. One of a slow bleed lower, and a recent attempt at reversal which is already being challenged to start this week.

Finally, there are many stocks that look like Walmart (WMT). And while it looks as "catty" at the other two patterns, I would at least consider trading it with a very short leash.

The PPO is at least hinting that something could be changing direction higher. But the dominant feature here is still a bearish one. It is that series of lower lows and lower highs since May. Again, a prominent stock with a 25% decline in short order. That's today's market.