Thursday, May 11, 2006

Nasdaq Sub-Intermediate and Short Term Trend Turn Down; Staying Positive Amongst The Panic.

Now all the bears can get bearish if they want. NOW! they have a reason. And as you can see below in the 'longs outperforming market' they missed a ton of stocks moving as much as 550% during the move they were denying. Instead of staying bearish the whole way up we instead made money. Now we have a reason to be bearish. I am still not going to be a full blown bear yet. When all indexes are in solid downtrends and rallies fail at the 50 and 200 dma, then I will be a solid bear. For now I am extra cautious. I think there is more downside to come.

Now, on with the facts. Which is really all that matters. The markets fell across the board, with the SP 600 leading the way with a 2.25% decline. The Nasdaq fell 2.1%, the SP 500 fell 1.3%, and the Dow Jones fell 1.22%. It was not a pretty day at all. This was the worst one day decline since Jan. 20th.

Volume rose across the board. The extremely high day of volume combined with the very large point declines is a clear cut distribution day. This then makes the small distribution days I was not counting NOW count. It is obvious, in hindsight, that is was indeed distribution. Breadth was obviously very negative. The NYSE was negative by a 13-to-4 margin and on the Nasdaq it was 4-to-1 negative. This kind of negative breadth has the feel of panic selling. This type of negative breadth normally appears at the end of a decline or correction. To combat that story, however, the put/call ratio remained very low throughout the day. Normally it would have seen a big spike. Conflict of indicators.

This decline, along with stocks breaking down, climax runs happening in HANS ERS and TIE (all long term winners), no new CANSLIM stocks setting up or breaking out, and all my holdings getting weak are clear indications, to me that this rally is under major pressure.

It is, obviously, time to start to sell your laggards, sell some stocks rolling over, sell stocks that have had climax runs, cut losses to 10% or less, and not buy stocks. If stocks start breaking down on heavy volume below key moving averages of the 50/200 you might want to consider selling. But that doesn't mean sell everything. There are a ton of stocks I am still long that have no damage in the charts. It is the charts acting up that need to be dealt with. If other stocks are still moving up and not flashing any clear distribution there is no reason to sell them.

In conclusion, I am starting to get defensive but at the same time don't know how much more negative it can get out there. Remember, I monitor a lot of chatrooms. It was very bearish. Beside the gold, silver, and metal longs. So the best thing to do here is be patient and not just start buying everything we think is a bargain. It is also not the time to start shorting everything blindly either. It is time to just watch a little and manage the "ol portfolio."

With that I am going to Sansei's. Have a great night and I will see you tomorrow.


New Swing Longs: AOM FCSE -- For more info on these longs go to Investors Paradise.

New Swing Shorts: Not Yet.

Longs Outperforming Market(number is % gain since initial purchase): GIGM-253 TTES-74 JOBS STRL-55 RAIL-89 FSTR VTS-41 BAS SHFL BWP LMIA-133 OMNI-68 SMTX EXFO KNOL-145 PEIX-134 PRVT OMCL ASPV PMTR-30 VSL SNTO-35 GPIC GSOL XNPT NAII WDHD LONG ATRO

Shorts Outperforming Market: NONE

Stocks On Radar Screen: AMTY

Take Some Profits If You Have Not Taken Any: SATC MERX GNBT SMSI XRTX SMDI GBN RATE STKL RBY RBAK TGE SWIR AMKR CUP TOMO MXWL SBAC LRCX

Selling Down Some Recent Buys: SVNT GLBC DTLK

Stocks That I Am Getting Completely Out: CLZR CPSS TAM SPWR KBX RMBS COMS BCRX MDCC JDSU

Disasters On One Of The Worst Days This Year: NONE!

Why I Cut My Losses: NENG IMMR AVII -- Remember these?

Why You Still Don't Catch A Falling Knife: ESCL -- 86% drop in four days.

12 comments:

Anonymous said...

kelly, as a follow up to shorting....look at chart for LM, that's was a great example of a short chart. breaks 200day and weak rally back up. then hits 200day as resistance and rolls over. that was a good risk/reward short at 200day when it failed. or-kiter

Joshua_NControl said...

Or-Kiter: You are on fire today!!!!

I agree about MERX but some profits should have been taken already w/ the run it had. This pullback was bad and if no profits have been taken they should be. But I am still long some MERX as it holds the 50 dma and sees some late intraday support.

I could not agree more and could not have said it better in the post that starts off "sell, sell, sell..." Too many profit signals were generated before this selloff.

And as for the comment to Kelly: You are on a roll! You are either learning a ton from this blog (which I doubt) or you are better than you let on.

Anonymous said...

Joshua....out of DTLK.....thanks..RIMM.(short).hitting 200 day EMA second time now in last 20 days....
watchlist for a long in ARRS & NITE..missed out on ZOLT...is it too late there? Thanks Kelly PS..Thailand has tons of wonderful women.....ONE DOOR MUST CLOSE BEFORE ANOTHER ONE OPENS..good luck

Anonymous said...

another reason why you dont buy on dip = LPSN....suck it up and take the loss, IT CAN GET WORSE

Anonymous said...

1 more thing about shorts or even when selling.....i learned from Stan weinstein's book is that you dont need volume confirmation when stocks break support to create a short trigger signal or a sell signal like you do when you buy on a breakout.....what do you think on that statment Josh...or-kiter (obvisouly it helps to have volume conviction on the downside but its not required)

Anonymous said...

im guilty of a little speculative buying end of day today(i actually bought some tech. put/call ratio of 1.3 and oversold ocillators spiked to same levels of recent nazdaq bottoms march 10,etc...i got stopped out of lots of stuff(last months profits went poof). i sitting on lots of cash/off margin and pretty neutral right now. stuff needs to base now. any bounces might set up some nice shorts...LEH/MER ugly and some commodities look ripe.(im too gun shy to short now as stuff looks oversold short-term and easy money been made for shorting and we could see some weak bounces on stuff that has topped) what do u think Josh, am i was off base on my thinking. - or-kiter

Market Speculator said...

Oregon has the general market trend given us a confirmed downtrend?

Until it does, shorting will wait until the market signals that it is time to short!

Market Speculator said...

To all that read Josh's Blog, please sign up for Investors Paradise!!!!

Anonymous said...

really enjoy your blog, very impressed with your system and your picks...excellent work.

Can you give me a reading on MIKR please.

Anonymous said...

looks like near-term tops(and maybe long-term top) are set on many of the gold stocks, massive volume churning on major winners like GG, GLG and etf GLD

Anonymous said...

mkt speculator, i am starting to think that yes certain mkt trends have changed....Comp/NDX/RUT/SML indexes have broken moving avg,trendlnies on volume,and there are sectors that are showing l-t top formations likeDJUSHB homebuilder index weekly chart just broke neckline H&Spattern and BTK ugly...ill sit on sidelines, i dont think its too early to be looking for shorts now on any weak bounces. - or-kiter

Market Speculator said...

Definitely not early looking for shorting opportunities...HANS ERS come to mind. But, its early...patience is a virtue!