Tuesday, March 28, 2006

Major Market Indexes Suffer A Distribution Day; Markets Do Not React Kindly To The New Fed Head.

For the 15th straight time the FOMC did their thing, raising the Fed fund rate to 4.75%. The headlines of the day said, "stocks fell due to the Fed signaling more hikes are coming." Wonderful. I am glad we got that stunning news. There was already an 80% chance that the Fed was going to go one more time after today, before the decision was made. So once again CNBC and the rest of the gang spin the story to try to keep viewers awake. LOL. It doesn't help.

Stocks were rising for most of the day, until the decision hit. Then the markets fell for the last 90 minutes into the close. The DJ-30 fell .9%, SP 500 was down .6%, the Nasdaq fell .5%, followed by the SP 600 and 400 with drops of .4% and .3% respectively.

Volume was higher, across the board. Giving all indexes a distribution day. The distribution day was the Nasdaq's fourth in four weeks and the SP 500's thrid in four weeks. Breadth was pretty poor, to go along with the volume, with the decliners over advancers 9.5 to 5 on the NYSE and 3 to 2 on the Nasdaq.

After reviewing my charts and studying the indexes for a little while tonight, I have come to the conclusion that most bears are nuts. By the tone of the day, I thought we were down 2% and that I was going to have a lot of stocks take big hits. Then I reviewed my stocks. Quite impressive, to be honest. I had one blowup out of the whole bunch and that one wasn't that bad. The only really ugly sector or area of the stock market was Brazilian stocks and that was due to the finance minister resigning.

So after that I decided to go through the top stocks in IBD. After doing that I feel confident things are going to be OK. I would rather be long than short here with markets hitting new highs, all-time highs, and leading stocks making good gains. Until that changes there is just no reason to be short or even think about shorting.

If and when the market rolls over we will have plenty of warnings and red flags. These red flags simply aren't happening yet. Can they happen in the future? Absolutely. But we can't make money in the future. We have to make money now!

So today helped pickup the negative chit-chat. I still hear a lot of bearishness from traders and most if they are not bearish are hesitant to buy stocks (this does not include the semi-pros/pros that read this site) here due to all the "so called" uncertanties. I am going to just listen to my charts and go with the trend till it changes.

Now does that mean I haven't been selling? Obviously not. I am locking in gains on stocks ALL the time. Read below and you will see two big winners being sold off to lock in gains after the charts show pattern breakdowns. There have been climax tops I have sold into--TWTC. Then there have been stocks I have completely sold off just to watch them go higher--NWRE ANAD PRLS OXPS. I still am glad I sold them for I was being disciplined and following my signals. All gave me at least a 60% gain on final sells.

Let's see what Mr. Market throws at us tomorrow. Whatever it is I am ready for it! Are you?

New Swing Longs: COSI -- To learn more about new longs go to Investors Paradise and scroll down to Josh Hayes and click on 'longs.'

Adding To Current Holdings: NHWK TVIA

New Swing Shorts: NONE

Longs Outperforming Market: WNR MORN ILSE HOM ASVI-29 TMI-28 CIB-43 UVN ORA-74 CBG-116 ERS-230 IVAC NGPS PETS-163 KEX-32 NVDA-80 KDN SCHK-37 KNXA-51 UIC-47 LPSN STRL EAGL-60 RUTH ATHR-105 FRGB KEYS-33 FFIV CVO-82 VTS MEK-57 NHWK IHS SSW TGC-71 TWTC-157 PEIX GNBT-114 TVIA OMNI WTSLA CRXL HOMS-33 MXWL ACTG-26 CPST TGB-29 AKN LIOX BKHM-60 MGLN GIGM-105 LMIA-79 SFE CNXT-56 JDSU-71 GEMS FDRY-36 HTI SF FSP (numbers after stocks indicate % increase since entry).

Shorts Outperforming Market: NONE

Stocks On Radar Screen: MED

Perfect Example Of When To Sell/Partial Sell Some Of Your Big Winners: BBD RAIL

Retreat! Retreat!: BBC

7 comments:

Anonymous said...

Joshua,

Tvia just closed its third quarter of commercialization of their chips and is on track for a top line ramp of 300% QDEC2005 to QDEC2006, based on stated run rates and customer count from the chairman in the last CC. looking back three years on sales growth digs too deep into the R & D cycle.

Y.Y. said...

just sold stxs breaks 50 dma's

Joshua_NControl said...

YY, you have to wait till the end of the day to sell if it breaks the 50 dma. If it breaks the 50 dma like it is now it isnt necessarily a bad thing. Look at the daily candle. It has already made it back to upper intraday range. And look at volume. This is support, today. But if you are a new trader and are not used to using charts at the end of the day if we stay below the line you could cut your loss.

But do to the low volume, the stock sill being above the open of the "signal" day, and the beauty of the chart (very green BOP, nice tight price action) I am staying long ALL of my STXS.

STXS has come down on volume much lower than the uptrend.

Still long and very strong. A violation of the 50 dma intraday isn't a sell signal. It is a bad close below the 50 dma. This chart is way too pretty to micromanage it like this. It is also too volatile to manage it like that.

Look at the up volume this year, look at the down volume this year, look at how nice the chart pattern is. STXS is still a good long. I am long the full line of STXS from my buy date of 2/27 and 3/17.

Y.Y. said...

i sold out stxs due to the fact that the stock didnt even bounce during yesterday and todays decline
i dont belive this stock will bounce back at all by the close

Anonymous said...

Hey, Josh, thoughts on the current base for DSTI. A little choppy, but does the volume rise today signal it may be ready to run above this downtrend line(maybe a handle)??

Also what do you think of ECLP pullback here? Look OK?

Is JSDA a possibility here since it pulled back to the BO point around 8? Don't know if it is too risky here.

Thanks a lot. Enjoy the blog.

Joshua_NControl said...

YY, If STXS closes like this I am going to sell all of the stock I picked up on 3/17. This will in fact be a failure.

I am still holding the long I picked up from February. I think STXS still looks good overall. The volume today still lower than the up volume in 2006.

You got it right! It isn't going to bounce that much before the close.

Joshua_NControl said...

DSTI: I want it to take out that March high first. It is on the watchlist. It is getting ready to breakout.

ECLP: I am still long. The pullback is very normal and under control.

JSDA: It is too new. We dont know if it is safe to buy on a pullback. I would wait till it touched the 50 dma. Then you can plunge.