M = Market Direction: Why Even Great Stocks Fail in Bad Markets
O'Neil's own claim that this is the single most important CAN SLIM criterion — most stocks, including great ones, move with the overall market.
The M criterion is O'Neil's assessment of the overall stock market's current trend — and he states directly, more than once, that this is arguably the single most important of the seven criteria, since his historical study found that the large majority of individual stocks, including ones meeting every other CAN SLIM criterion perfectly, tend to move in the same general direction as the broader market rather than independently of it.
The practical consequence is a specific discipline: O'Neil recommends significantly reducing new buying, or exiting existing positions, during a confirmed market downtrend, regardless of how attractive an individual stock's own fundamentals look — waiting instead for clear technical evidence the broader market has resumed an uptrend before deploying significant new capital.
O'Neil's own account treats M as a kind of gatekeeper criterion — a stock can pass every other CAN SLIM test (strong earnings, a genuine new catalyst, institutional sponsorship, industry leadership) and still be a poor purchase if the overall market is in a confirmed downtrend, since even excellent individual stocks were found, in his study, to frequently decline alongside a falling broader market. This is why the criterion comes last in the acronym but functions, in his own emphasis, closer to first in actual importance.
A stock meets every CAN SLIM criterion except M — strong accelerating earnings, a genuine new product, high volume on a breakout, growing institutional ownership, clear industry leadership — but the broader market is in a confirmed, technically-defined downtrend. O'Neil's discipline would still caution heavily against a large new purchase here, based on his historical finding that even excellent individual stocks meeting six of seven criteria frequently still declined during broad market downturns, dragged down by the same forces affecting most other stocks.
- O'Neil states directly that market direction (M) may be the single most important of the seven CAN SLIM criteria — most individual stocks move with the broader market, not independently of it.
- The practical discipline is reducing new buying or exiting positions during a confirmed market downtrend, regardless of how attractive an individual stock's own fundamentals look.
- M functions as a kind of gatekeeper over the other six criteria — meeting every other test doesn't override an unfavorable overall market reading in O'Neil's system.