Monday, June 12, 2006

Bottom Callers Continue To Look Foolish; Trapped Longs Bail, Ending The Rally Attempt.

The rally attempt that some market participants have gotten all excited about has, shockingly, failed. This, of course, is no surprise to the individuals who paid attention to the stock market indexes distribution days in the beginning of May. The rallies that have followed after that swoon has been on volume much lower than the downtrend.

The losses got bigger, on Monday, with the SP 600 falling 2.45%, the Nasdaq falling 2.05, the SP 500 down 1.27%, and the DJIA falling .91%.

Volume was higher across the board, adding another distribution day to this downtrending bear market. Breadth was very negative with decliners over advancers by a 3-to-1 margin on the NYSE and a 4-to-1 margin on the Nasdaq.

There are only so many ways I can say what I have been saying for the past month. The selling hasn't stopped since the market has topped and the mood is finally starting to turn negative. But it still isn't time. It will be one day but it will not be this week.

The only wise thing to do is to take a step on the sidelines and wait this out. If you can keep the money you have instead of trading it away, you will have more capital to put to work when the sea of red stops and the bull is unleashed again. Somehow, I don't think that is going to happen till at least August. The damage to individual stocks and the indexes suggest the markets have a lot more pain or sideways trade to go through.

Which leads me to an important point. Don't buy a stock just because you "think" it is a bargain. Bargains can get cheaper and they usually do. You will NEVER know where the bottom is. So stay patient in cash and wait for the bull to start again so you can have the odds back on your side. Just like we had from the October-May rally or better yet the March 2003 rally. The stocks that breakout to new highs from nice patterns first after this bear market will provide plenty of gains to make up for all the hand sitting.

Ok, this is the time of the year when I open up my copy of "Reminiscenses of a Stock Operator" and take a mini-vacation--I have done this every year, since I moved to Maui. This book is simply the greatest book I HAVE EVER read. Reading this book every year refreshes me on the principals it takes to become one of the greatest traders in the world.

This market is not going to do anything during this week and on that note I am not going to do anything either for the next five market sessions. I am taking a break from writing this market commentary. However, I will find time to update my positions and new longs and new shorts.

My plan was to write on this blog for free for three years before turning it commercial. So far so well. This will be my first break from here, since I started this blog in March 2005. I think I deserve it. This isn't the kind of market I like chatting about anyways. Constant dread isn't my bag baby! That is for Barry Ritholtz.

I will be constantly dropping in at Investors Paradise. So if you only read my blog, you are going to be missing a lot. I am only taking a break from the commentary.

New Swing Longs: NONE


Longs Outperforming Market-number is % gain since long: CTCI-29 FMD EYE SBIT

Shorts Outperforming Market-number is % gain since short: SWC-25 CRXL-24 USG-23 MNST-21 CLF-19 JOYG-18 ILF-16 EWZ-15 ASA-14 WSM-14 NVT-13 EWY-12 NUE-11 RS-11 ELY-9 DB-9 RTP-9 CE-8 STLD-8 IYM-7 ATI-6 SIVB-6 BPFH TMO DIA AMAT RF MRK ERIE UAG TRI AVID

Stocks On Radar Screen: NU MVC


Anonymous said...

Hi Josh:
Have a great vacation!
Eagerly await your paid site.
Even an old dog like me can learn new tricks and you've taught me a lot and I've profited from it.

Regarding "Reminiscences......", don't forget he died broke after committing suicide in the cloakroom of the Sherry-Netherlands Hotel in NYC.

But, I agree with you that its the best market book ever written.

Have fun!

"A.FRIEND" of your Blog

Y.Y. said...

spx hits 3 year uptrend line @1225
the blood continues to run!!!!!