Stressed Out And Tired; Stocks End The Week With A Boring Session, Leaving The Indexes Mixed And Flat
By MauiTrader
Another wild-yet-boring intraday session came to an end, with stocks going nowhere. The lack of action today is a bit of a surprise, considering all the news items we had to digest. First, we got off to a positive start and continued higher early on, on the back of a bunch of macro news. The core personal consumption index rose .3% in Feb (biggest jump since August) and personal income and spending rose .6%, contributing to the fact that core inflation is now at 2.4% which is outside the Fed comfort zone of 1%-2%. This data should make it clear that the Fed will not be cutting interest rates anytime soon.
There were two more headlines of interest: The University of Michigan consumer confidence survey was revised down to 88.4 from 88.8 and the Chicago Purchasing Managers index rose to 61.7 in March from 47.9 in February. Anything over 50 on the CPMI indicates expansion.
However, news that the Bush administration via the Commerce Department are going to put economic sanctions/tariffs on China to protect the US paper producers from unfair subsidies. That sent stocks and the dollar lower. I hate ANY kind of economic sanction but we will see how this turns out.
It turned out, for the day, stocks weren’t that worried over it and they managed to recoup almost all of the losses that were sustained from the intraday highs. This was the second day in a row stocks have reversed after selling off hard in early hours of trading.
When the closing bell rang, stocks ended up mixed all over the board. The Nasdaq led the way with a .2% gain, the SP 400 gained .1%, and the DJIA ticked higher by .05%. On the downside, the NYSE led the way with a .2% loss, the SP 500 followed with a .1% loss, and the SP 600 ticked slightly lower by .03% basically closing flat. Leading stocks, via the IBD 100, closed flat with a 0.0% move. Like I said, boring. If you fell asleep before the market opened and woke up after the bell, you might question if it really opened.
The Nasdaq, SP 500, and DJIA are all below their 50 day moving averages and the NYSE, SP 400, and SP 600 are above their 50 day moving averages, showing you exactly how mixed this market really is, not only today but the past week.
Volume ticked higher today on both the NYSE and the Nasdaq. However, volume does not really matter today. What does matter is knowing this was not churning because volume was below the 50 day volume average; signaling the big boys were not interested in pushing the market around today.
Advancers beat decliners by a 6-to-5 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. The fact that the NYSE was down today but breadth was up is very positive and shows you which index is leading. Speaking of leading, just look at the 52-week new highs. There were 132 NH on the NYSE and only 11 NL. On the Nasdaq it was 85 NH to 45 NL. Obviously, the strength, is clearly in the NYSE. Metals, Steel, Oil, and Food stocks; the NYSE is their home.
If you still don’t believe me that this market is boring and trendless, check out these numbers. For the week, the Nasdaq and the SP 500 lost 1.1%, the DJIA and SP 600 lost 1%, and the NYSE lost .8%. For the quarter (A FULL THREE MONTHS), the SP 600 showed some action with a 3% gain (that is very impressive). But the rest of the indexes spent the last three months going nowhere. The NYSE gained 1.3%, the DJIA rose .9%, the Nasdaq gained .3%, and the SP 500 gained .2%. You have to give the SP-600 some credit, because a 12% annual gain is very nice, but the rest of the indexes show you why Jesse Livermore and many of the greatest traders only traded when the indexes were in clear trends. I hope you made money but if you did not make any money…how much did you trade this year? Was it worth it? Or was “sitting” the right play?
There was one pocket of action, on Friday. The Homebuilder-Residential/Commercial group tanked another 3% today. This sector continues to show you why you should NEVER buy stocks that are a “bargain,” are “cheap,” are “values,” and that you think have “bottomed.” How many dip buyers keep getting killed here? I know quite a few people buying these stocks thinking they are picking up bargains. Good luck fighting through all that resistance.
Oh my, so after a week and a half, since the follow-through day, here we are still waiting for another day of substantial gains on a surge in volume that will help produce many stocks breaking out of sound bases. Well, you may be waiting, but I really don’t care anymore. LOL. Bu the fact that we have not had an accumulation day since the follow-through is troublesome. Remember just because we are holding above the lows and have had only one distribution day–that, yes, can be taken as bullish–we still need more gains on higher volume if this is going to hold.
This market has some real problems. If we are going to be going higher, trust me, I will play it. Hell, I am already playing it with 200 stocks. But the fact that the CANSLIM select group of stocks is still only 58% invested a week and a half since the follow-through day is very very very troublesome. You want another troublesome fact? The Nasdaq is below the close of the follow-through day and since then has seen no accumulation days and one distribution day.
I am 100% sure that by now, if this market was really ready to blast-off, we would have the CANSLIM select at 100% invested, I would not be long 200 stocks with 130 of them being pure speculative to half-way-speculative issues (stocks not of CANSLIM quality), I would not continue to find only speculative stocks to go long, there would be more CANSLIM quality stocks breaking out of bases, and there would be more CANSLIM quality stocks setting up in bases. We do NOT have this happening. This is not a market for growth/momentum investors. If you are looking to hit a home run, you probably need to adjust your stance and swing. Because this market has a powerful pitching rotation that is on fire right now. Single, double, and MAYBE a triple, if you are lucky is all that growth investors can expect, with the VIX still below 20.
I guess with so many people expecting the worse and the put/call still over 1 at 1.05 shows that there is a lot of bearishness out there. However the AAII poll this week showed bears come way down and bulls go over 50%. Also, this weekend, the realmoney.com poll shows 54% bulls, only 19% bearish, and 26% neutral (or confused, whatever you want to call it). So to me it seems the crowd is now bullish. How confusing can it get????? But really the smart trader knows not to really care or give a damn. Until you get pretty green charts in stocks with excellent fundamentals we know it is just noise.
The dip buyers can continue to step in here and believe nothing is wrong and can continue to buy stocks thinking they will go to the moon. But the fact that we have the government stepping in with sanctions, poor economic numbers, lower GDP growth, inflation, and a new Congress that is about to raise taxes by not extending the Bush tax cuts and you have a disaster waiting to happen. What is wrong here? You retail money that is NOW just buying stocks (I can see this data via mutual fund inflows–January and February inflows were HUGE) are buying at the top AGAIN. These inflows always happen right at the end or near the end of a trend. What is wrong? You are four years too late! Where were you in October 2002? Where were you in March 2003? If you are just now buying stocks, you should look in the mirror and ask yourself who is really buying your stocks; you or the media that convinced you the evil George W. Bush’s economy was doomed to fail? Since the tax cuts the Nasdaq is up 90% and the SP 600 is up 137%. Yeah, tax cuts don’t work, do they?
Next week is a short week, with Good Friday occurring on…Friday. And we are also coming upon earnings season. We start to get numbers this week but the real action officially kicks off on the 10th when AA reports. There might be one minor problem this time, which you can add to the list of problems I have already mentioned, as wall street is looking for earnings to come in 4% to 6% higher YOY. Not bad you say? Yes, you are right. But the problem lies in the fact that earnings have come in over double digits for the past 14 quarters.
If earnings do not come in at double digits, this will be the first time since 2003 that we have not seen this. If you don’t think that is potential bearish, you really don’t understand the stock market. GDP growth and EPS growth is the two clear leading indicators for stock markets. Not just the US stock market, ALL MARKETS ALL OVER THE WORLD GOING BACK YEARS AND YEARS AND YEARS. Find a country check out the GDP growth and then watch the stock market follow. How is the USA GDP growth looking? I am a question asking fool tonight!!!
Expect more choppy and meaningless trading this week. I am only predicting this so that we actually get a follow-through to the downside or upside here. Normally, whatever I think will happen does not happen. So I predict the market will flatline and be choppy intraday every day next week.
This market is still in a very weak bullish phase. But it is still in a bullish trend so there is no reason to bet against it. I am sure the safe time to short will be soon; but with all these beautiful green charts in these tiny small cheap crap stocks I have to take them. They are working (80% of them) and some are producing some nice gains and have chart patterns for potential big gains. However, if the market weakens expect them to go with it. But that is why I am only 56% invested. Which is AMAZINGLY (not really, just showing you how discipline works) similar to the CANSLIM select only being 58% invested. CASH IS STILL KING!!! KING, I TELL YOU!!
Aloha and I will see you in the chat room. I am tired and stressed out (not from the market; from socialized medicine…the only medicine on Maui).
Market Commentary At Big Wave Trading Bronze Level One.
Top Holdings Up This Week - Signal Date
KNOL 295% - 1/12/06
AKAM 230% - 9/30/05
TRCR 161% - 1/12
TTEC 157% - 8/25
OMTR 131% - 9/15
JSDA 108% - 12/20
TNH 107% - 10/26
CCOI 107% - 9/27
HRZ 103% - 9/27
PRGX 97% - 1/12
BONT 87% - 10/3
MEH 83% - 8/30
EVEP 80% - 11/16
AOI 76% - 11/19
CLRT 75% - 11/30
CHINA 74% - 8/16
IMKTA 72% - 8/28
CPA 66% - 9/15
EPHC 66% - 12/20
DA 65% - 1/25/06
IIVI 61% - 8/30
PERY 59% - 10/4
ULTR 58% - 10/27
CXW 57% - 5/19
HURN 57% - 9/13
XIDE 56% - 1/29
APLX 54% - 9/28
BMTI 52% - 10/25
MFW 50% - 1/29
DECK 50% - 9/13
KHDH 49% - 5/30
OEH 48% - 11/20
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Saturday, March 31, 2007
Saturday, March 24, 2007
A Boring Day Of Trading Ends With Stocks Mixed On Lower Volume; Best Week For Stocks In Six Months
Market Commentary At Big Wave Trading Bronze Level One.
TOP CURRENT HOLDINGS UP THIS WEEK LISTED AFTER MARKET COMMENTARY BELOW
Preview of current "Daily Market Analysis" Posting:
A Boring Day Of Trading Ends With Stocks Mixed On Lower Volume; Best Week For Stocks In Six Months
By MauiTrader
A boring, erratic, and overall lame session came to end Friday, after a week of surprises on many fronts. The only thing not boring today was the post-1pm EST action in the Nasdaq; up, wedge up, down, wedge down, and up. Still, that only led to a flat close. Today’s headlines were much more subdued than the previous four days, but we still had some important numbers to digest. Existing-home sales were up 3.9% in February to an annualized 6.69 million. That was the fastest growth since April and above economist estimates. This was a welcome report, after all the thrashing we received last month. The other news item making its way around was the 15 British sailors and marines that were captured by Iranian kidnappers. However, as expected, this was not market moving news.
At the close, the SP 600 was the daily winner with a .4% gain, the NYSE followed with a .3% gain, the DJIA gained .2% finishing higher for the fifth straight day, the SP 500 finished .1% higher, and the Nasdaq bucked the trend falling .1%. Leading stocks did not do anything special today, with the IBD 100 gaining only .1%. The lack of ability to keep up with the top performing indexes is a subtle sign of weakness and may indicate that the rally is running out of steam, already, in the short-term. It is still too early to conclude for a fact that is what we have happening here.
Volume was much lower on both the NYSE and the Nasdaq. Volume was running about even with yesterday’s total. But around 1pm EST, traders took off early, starting the weekend early. The lower volume is just what you see after such strong gains on Wednesday. The volume on the NYSE was the lowest total since late February, showing that big funds were not interested in buying or selling stocks here. Breadth was positive on both exchanges, with advancers beating decliners by a 9-to-7 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. New highs continue to trounce new lows, by 301-31. This action shows that despite the big boys being absent, breadth is still strong and there are many stocks still making gains, despite the low volume rally after the Feb 27 selling.
The biggest gains are mainly coming from the old leaders in the Oil & Gas industry. These stocks continue to dominate the new highs list and continue to work there way back to the top of the industry group tables in IBD. Part of this is due to the fact that oil has stopped moving down. Today, oil rallied to over $62 a barrel, closing at $62.28. The gains in crude oil were given credit to the Iranians capturing the 15 British soldiers.
Overall, it was a great week, for the major market indexes. All of them produced significant gains, helping traders quickly forget about the pain from February 27. For the week, the SP 600 led the way with a 4.1% gain, the NYSE followed with a 4% gain, the SP 400 came in with a 3.9% gain, the SP 500 rallied 3.5%, the Nasdaq gained 3.2%, and the DJIA came in with a 3.1% gain. It was a very good week, for investors who wanted the market to recapture the losses. In fact it was the best week for stocks in six months.
I do have to admit that this market is holding up very well, considering the amount of quick damage off the February highs. My new buys are doing very well, since then. Most are going up and there have been very few that have not gone up and have reversed. In fact, I can not think of any complete sells out of any new buys the past month. Every long I have taken is up. The only problem is none of these longs are breaking out of sound long-term bases. And the ones that are breaking out of long bases are not CANSLIM quality stocks. The CANSLIM quality stocks are breaking out of shorter bases and/or are bouncing off key moving average lines indicating that it is only a resumption of an advance and not part of a fresh new bull market.
The volume on the way up is also well below the volume figures on the sell-off last month. This rally still looks like an oversold bounce off a very pessimistic tape. That bounce has simply come too soon. We have not done enough damage on the downside and we have not based long enough to get a real correction that could set us up for a powerful new bull market. Without this long correction, you do not have enough time go by for a change in leadership to develop. The new leadership usually comes out of longer drawn-out corrections. Not from quick collapses followed by a lower volume bounce. You simply can not create enough momentum to the upside without creating nice long green bases. And you can’t create those bases without the market taking a breather for more than a couple of weeks.
Instead this uptrend appears to just be a continuation of the longer bull market that started in October 2002. However, like I have been saying, this pullback is and was much different than the rest, with many charts breaking down on heavy volume. However, not all charts did break down. By not panicking and using sound discipline, I was still long 170 stocks in clear uptrends. The fact that so many stocks remained in uptrends, after the sell-off, was the tip-off that this breakdown was not necessarily going to lead to a crash. By doing that, I am still long many stocks that have now made strong gains while the market recovers. And by having cash ready for the new buys, I was able to move dead money into stocks that have turned out very well. Therefore, my account, is much higher than where it was the day after the sell-off.
So, there are some signs that this rally might work out for a while. However, the rally off the April 2000 lows lasted until August 2000, after a significant sell-off. How did that work out for the perma-bulls? But before I start getting all bullish again I am going to have to see more hot stocks with hot fundamentals break out of round, sound, and green bases. I don’t know how I am going to get these this far into a bull market with VIX this ridiculously low. But that is what I am looking for. However, without a big sell-off that causes a jump in the VIX, it sure is going to be hard to find these beautiful long bases.
So, without this pullback, the gains that we will get will not be the variety that produces many 100%-500% winners in six months. Instead you are going to have to be happy with all the 20%-150% gainers that I find. With the VIX and fear this low, it is impossible to get any real movement in stocks; impossible! This market is best for paying the bills and maybe putting a little bit of money away. This market is not for those of us who are looking to become wealthy and make a killing. Markets like 1999 and 2003 had so much fear in them when they launched there bull markets that making a killing and getting rich was not a problem. Right now, if you are looking to get rich, you have a problem: it is called the stock market.
Since this is not the market to be making a mint in, it must also be said that the most important play right now is to keep cash on hand. Without massive gains in the indexes on huge volume with tons of CANSLIM stocks breaking out, you can be sure that the odds are high for this rally to fail. So since the indexes are not perfect, there is no reason to go all-in on margin here (200% long). And there will not be a time to go all-in, until you start seeing this action. Normally, like I keep saying, to burn the point in, you need a long drawn-out correction. That creates the proper environment that launch great bull markets.
The one important thing to remember here, also, is to not chase stocks. If you sold all of your longs, when you panicked after the Feb 27th selloff, you should step back and think about the situation. How often and how many times do you have to hear that it is never smart to panic? Then why do you still do it? I know many traders who did the right thing and sold stocks breaking down, after the Feb sell-off. However, those same traders I know dumped stocks that were still going up or consolidating. Why? Why would you sell a stock if it is going up? Especially if it was going up before the sell-off and DURING THE sell-off. If your stock rose before the sell-off and after the sell-off, yet you sold, you must recognize that you are still trading very scared and NO great investor or trader has ever become a great investor or trader by trading scared. That is a sign of personal weakness. Something I am not familiar with at all.
If you are still sitting in cash, that is great! Stay patient and wait for those HOT charts with HOT fundamentals. Then, if everything is perfect and the market is right, go all-in. You can make everything back and more that you might have lost if you tried to buy stocks now based on the fact that you messed up and sold them when you were not supposed to sell them. There is always a bull market somewhere, and even if there is not, there will be one soon somewhere.
We can even take a personal lesson by me during the recent selloff: ROCM. I sold that stock after a nasty breakdown below key support on 3/5. This breakdown came after what appeared to be, in hindsight, an early February top. Thankfully, I took 20% off there. But after the Feb selling, the stock held up well so I remained long. Then, however, going with the trend of the market, ROCM fell. And fell hard on heavier volume. After 3/5, it clearly looked like ROCM had topped with the market. But that turned out to be the low. Since then the stock has gone straight up and my 9% gain that I took on 3/5 is now a 75% gain. Do I feel stupid? Yes. But did I follow my rules? Yes. So, therefore, I do not feel like I made a severe mistake.
What if ROCM did not break the February lows and would have held the 50 dma? Would I still be long? OF COURSE! YES! If that is the case no profit taking rules would have been hit and I would be sitting pretty in ROCM with a 75% gain on my remaining position. Instead I stand alone. No big deal.
Folks, we are very late in this rally. There is clear economic slowing out there in the subprime, home, jobs, and manufacturing markets. There are more breakdowns on heavy volume with low volume rallies in individual stocks than I have seen since 2002. And everywhere I turn people are asking me about stocks because they have just recently purchased stocks, after selling their real estate holdings or getting out of real estate. They believe every dip should be bought and who is to blame them? CNBC keeps telling them that they should buy this dip as this is just a normal correction. If it is so normal, why are so many charts ugly this time. If it is so normal, why are all the talking heads on CNBC telling everyone to buy. They don’t do that at market bottoms. They only do that at or near market tops. After four years of gains without a 10% correction in the DJIA, I would err on the side of caution and still conclude that there is more risk to the downside here than the upside. If we were down for four straight years, do you think I would be saying the same thing? Of course not. This is history. And history tells us there shouldn’t be much more to go.
We shall see how correct history is. Aloha and I will see you in the chat room. Have a great weekend!!!
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
CVO 180% - 8/17/05
TTEC 144% - 8/25
OMTR 134% - 9/15
MA 124% - 8/2
IHS 122% - 12/21/05
CCOI 111% - 9/27
HRZ 108% - 9/27
TNH 102% - 10/26
ACP 96% - 11/13
PRGX 94% - 1/12
CPA 89% - 9/15
BONT 87% - 10/3
CHINA 83% - 8/16
JSDA 88% - 12/20
SOFO 79% - 9/29
LTS 75% - 1/11
HURN 74% - 9/13
AOI 73% - 11/19
EVEP 71% - 11/16
BAM 71% - 11/17/05
IMKTA 73% - 8/28
DA 62% - 1/25/06
CLRT 61% - 11/30
PERY 61% - 10/4
EPHC 60% - 12/20
ULTR 58% - 10/27
IIVI 57% - 8/30
DECK 55% - 9/13
CXW 54% - 5/19
IMMU 52% - 12/19
TRBN 51% - 10/31
APLX 49% - 9/28
CNH 48% - 11/2
LFL 47% - 12/13
XIDE 47% - 1/29
OEH 45% - 11/20
TATTF 45% - 12/13
TOP CURRENT HOLDINGS UP THIS WEEK LISTED AFTER MARKET COMMENTARY BELOW
Preview of current "Daily Market Analysis" Posting:
A Boring Day Of Trading Ends With Stocks Mixed On Lower Volume; Best Week For Stocks In Six Months
By MauiTrader
A boring, erratic, and overall lame session came to end Friday, after a week of surprises on many fronts. The only thing not boring today was the post-1pm EST action in the Nasdaq; up, wedge up, down, wedge down, and up. Still, that only led to a flat close. Today’s headlines were much more subdued than the previous four days, but we still had some important numbers to digest. Existing-home sales were up 3.9% in February to an annualized 6.69 million. That was the fastest growth since April and above economist estimates. This was a welcome report, after all the thrashing we received last month. The other news item making its way around was the 15 British sailors and marines that were captured by Iranian kidnappers. However, as expected, this was not market moving news.
At the close, the SP 600 was the daily winner with a .4% gain, the NYSE followed with a .3% gain, the DJIA gained .2% finishing higher for the fifth straight day, the SP 500 finished .1% higher, and the Nasdaq bucked the trend falling .1%. Leading stocks did not do anything special today, with the IBD 100 gaining only .1%. The lack of ability to keep up with the top performing indexes is a subtle sign of weakness and may indicate that the rally is running out of steam, already, in the short-term. It is still too early to conclude for a fact that is what we have happening here.
Volume was much lower on both the NYSE and the Nasdaq. Volume was running about even with yesterday’s total. But around 1pm EST, traders took off early, starting the weekend early. The lower volume is just what you see after such strong gains on Wednesday. The volume on the NYSE was the lowest total since late February, showing that big funds were not interested in buying or selling stocks here. Breadth was positive on both exchanges, with advancers beating decliners by a 9-to-7 margin on the NYSE and by an 8-to-7 margin on the Nasdaq. New highs continue to trounce new lows, by 301-31. This action shows that despite the big boys being absent, breadth is still strong and there are many stocks still making gains, despite the low volume rally after the Feb 27 selling.
The biggest gains are mainly coming from the old leaders in the Oil & Gas industry. These stocks continue to dominate the new highs list and continue to work there way back to the top of the industry group tables in IBD. Part of this is due to the fact that oil has stopped moving down. Today, oil rallied to over $62 a barrel, closing at $62.28. The gains in crude oil were given credit to the Iranians capturing the 15 British soldiers.
Overall, it was a great week, for the major market indexes. All of them produced significant gains, helping traders quickly forget about the pain from February 27. For the week, the SP 600 led the way with a 4.1% gain, the NYSE followed with a 4% gain, the SP 400 came in with a 3.9% gain, the SP 500 rallied 3.5%, the Nasdaq gained 3.2%, and the DJIA came in with a 3.1% gain. It was a very good week, for investors who wanted the market to recapture the losses. In fact it was the best week for stocks in six months.
I do have to admit that this market is holding up very well, considering the amount of quick damage off the February highs. My new buys are doing very well, since then. Most are going up and there have been very few that have not gone up and have reversed. In fact, I can not think of any complete sells out of any new buys the past month. Every long I have taken is up. The only problem is none of these longs are breaking out of sound long-term bases. And the ones that are breaking out of long bases are not CANSLIM quality stocks. The CANSLIM quality stocks are breaking out of shorter bases and/or are bouncing off key moving average lines indicating that it is only a resumption of an advance and not part of a fresh new bull market.
The volume on the way up is also well below the volume figures on the sell-off last month. This rally still looks like an oversold bounce off a very pessimistic tape. That bounce has simply come too soon. We have not done enough damage on the downside and we have not based long enough to get a real correction that could set us up for a powerful new bull market. Without this long correction, you do not have enough time go by for a change in leadership to develop. The new leadership usually comes out of longer drawn-out corrections. Not from quick collapses followed by a lower volume bounce. You simply can not create enough momentum to the upside without creating nice long green bases. And you can’t create those bases without the market taking a breather for more than a couple of weeks.
Instead this uptrend appears to just be a continuation of the longer bull market that started in October 2002. However, like I have been saying, this pullback is and was much different than the rest, with many charts breaking down on heavy volume. However, not all charts did break down. By not panicking and using sound discipline, I was still long 170 stocks in clear uptrends. The fact that so many stocks remained in uptrends, after the sell-off, was the tip-off that this breakdown was not necessarily going to lead to a crash. By doing that, I am still long many stocks that have now made strong gains while the market recovers. And by having cash ready for the new buys, I was able to move dead money into stocks that have turned out very well. Therefore, my account, is much higher than where it was the day after the sell-off.
So, there are some signs that this rally might work out for a while. However, the rally off the April 2000 lows lasted until August 2000, after a significant sell-off. How did that work out for the perma-bulls? But before I start getting all bullish again I am going to have to see more hot stocks with hot fundamentals break out of round, sound, and green bases. I don’t know how I am going to get these this far into a bull market with VIX this ridiculously low. But that is what I am looking for. However, without a big sell-off that causes a jump in the VIX, it sure is going to be hard to find these beautiful long bases.
So, without this pullback, the gains that we will get will not be the variety that produces many 100%-500% winners in six months. Instead you are going to have to be happy with all the 20%-150% gainers that I find. With the VIX and fear this low, it is impossible to get any real movement in stocks; impossible! This market is best for paying the bills and maybe putting a little bit of money away. This market is not for those of us who are looking to become wealthy and make a killing. Markets like 1999 and 2003 had so much fear in them when they launched there bull markets that making a killing and getting rich was not a problem. Right now, if you are looking to get rich, you have a problem: it is called the stock market.
Since this is not the market to be making a mint in, it must also be said that the most important play right now is to keep cash on hand. Without massive gains in the indexes on huge volume with tons of CANSLIM stocks breaking out, you can be sure that the odds are high for this rally to fail. So since the indexes are not perfect, there is no reason to go all-in on margin here (200% long). And there will not be a time to go all-in, until you start seeing this action. Normally, like I keep saying, to burn the point in, you need a long drawn-out correction. That creates the proper environment that launch great bull markets.
The one important thing to remember here, also, is to not chase stocks. If you sold all of your longs, when you panicked after the Feb 27th selloff, you should step back and think about the situation. How often and how many times do you have to hear that it is never smart to panic? Then why do you still do it? I know many traders who did the right thing and sold stocks breaking down, after the Feb sell-off. However, those same traders I know dumped stocks that were still going up or consolidating. Why? Why would you sell a stock if it is going up? Especially if it was going up before the sell-off and DURING THE sell-off. If your stock rose before the sell-off and after the sell-off, yet you sold, you must recognize that you are still trading very scared and NO great investor or trader has ever become a great investor or trader by trading scared. That is a sign of personal weakness. Something I am not familiar with at all.
If you are still sitting in cash, that is great! Stay patient and wait for those HOT charts with HOT fundamentals. Then, if everything is perfect and the market is right, go all-in. You can make everything back and more that you might have lost if you tried to buy stocks now based on the fact that you messed up and sold them when you were not supposed to sell them. There is always a bull market somewhere, and even if there is not, there will be one soon somewhere.
We can even take a personal lesson by me during the recent selloff: ROCM. I sold that stock after a nasty breakdown below key support on 3/5. This breakdown came after what appeared to be, in hindsight, an early February top. Thankfully, I took 20% off there. But after the Feb selling, the stock held up well so I remained long. Then, however, going with the trend of the market, ROCM fell. And fell hard on heavier volume. After 3/5, it clearly looked like ROCM had topped with the market. But that turned out to be the low. Since then the stock has gone straight up and my 9% gain that I took on 3/5 is now a 75% gain. Do I feel stupid? Yes. But did I follow my rules? Yes. So, therefore, I do not feel like I made a severe mistake.
What if ROCM did not break the February lows and would have held the 50 dma? Would I still be long? OF COURSE! YES! If that is the case no profit taking rules would have been hit and I would be sitting pretty in ROCM with a 75% gain on my remaining position. Instead I stand alone. No big deal.
Folks, we are very late in this rally. There is clear economic slowing out there in the subprime, home, jobs, and manufacturing markets. There are more breakdowns on heavy volume with low volume rallies in individual stocks than I have seen since 2002. And everywhere I turn people are asking me about stocks because they have just recently purchased stocks, after selling their real estate holdings or getting out of real estate. They believe every dip should be bought and who is to blame them? CNBC keeps telling them that they should buy this dip as this is just a normal correction. If it is so normal, why are so many charts ugly this time. If it is so normal, why are all the talking heads on CNBC telling everyone to buy. They don’t do that at market bottoms. They only do that at or near market tops. After four years of gains without a 10% correction in the DJIA, I would err on the side of caution and still conclude that there is more risk to the downside here than the upside. If we were down for four straight years, do you think I would be saying the same thing? Of course not. This is history. And history tells us there shouldn’t be much more to go.
We shall see how correct history is. Aloha and I will see you in the chat room. Have a great weekend!!!
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
CVO 180% - 8/17/05
TTEC 144% - 8/25
OMTR 134% - 9/15
MA 124% - 8/2
IHS 122% - 12/21/05
CCOI 111% - 9/27
HRZ 108% - 9/27
TNH 102% - 10/26
ACP 96% - 11/13
PRGX 94% - 1/12
CPA 89% - 9/15
BONT 87% - 10/3
CHINA 83% - 8/16
JSDA 88% - 12/20
SOFO 79% - 9/29
LTS 75% - 1/11
HURN 74% - 9/13
AOI 73% - 11/19
EVEP 71% - 11/16
BAM 71% - 11/17/05
IMKTA 73% - 8/28
DA 62% - 1/25/06
CLRT 61% - 11/30
PERY 61% - 10/4
EPHC 60% - 12/20
ULTR 58% - 10/27
IIVI 57% - 8/30
DECK 55% - 9/13
CXW 54% - 5/19
IMMU 52% - 12/19
TRBN 51% - 10/31
APLX 49% - 9/28
CNH 48% - 11/2
LFL 47% - 12/13
XIDE 47% - 1/29
OEH 45% - 11/20
TATTF 45% - 12/13
Saturday, March 17, 2007
A Choppy Day With A Downside Bias Ends With Stocks Slightly Lower; Quadruple Witching = Quadruple Boring
Market Commentary At Big Wave Trading Bronze Level One.
To view the market commentary from the top on 2/27 top, click here.
Preview of current "Daily Market Analysis" Posting:
It was a weird sluggish session, today, but in the end it was another typical quadruple-witching Friday. However, there was plenty of data for Wall Street to go through, despite this once a month event. The CPI rose a little over .4%, a bit higher than the .3% estimate. But the core prices came in line rising .2% for a year over year change of 2.7%. Industrial production jumped 1% in February, over the readings for a .3% increase and its largest increase since November. Michigan consumer confidence fell (are you surprised there?) to 88.8. Add the fact that oil fell below $58 and might have thought it would have been a more exciting day. Nope. Quadruple-witching ruled the day.
At the close, the SP 400 led to the downside with a .55% loss, the DJIA, SP 500 and SP 600 closed .4% lower, the Nasdaq fell .3%, and the NYSE held up the best only falling .2%. The IBD 100 fell .6%, leading all the indexes lower. There is really nothing to read of that, however, as this was just that kind of day where you really can not draw any conclusions about underlying weakness or strength amongst the indexes.
Volume was higher on the NYSE by about 35% and higher on the Nasdaq by 20%. Breadth was negative on the NYSE, with decliners over advancers by a 5-to-3 margin. On the Nasdaq, losers beat winners by a 3-to-2 margin. New highs beat new lows by a 114 to 96. But the Nasdaq still has more lows to new highs; 64 new lows - 34 new highs.
All of the increase in the volume can be directed completely to the quadruple-witching action. The higher volume, with the price declines over .2% would normally be a clear distribution day. That would send a warning signal up that this rally has a much higher chance of failing. But I find it hard to draw conclusions on days like today so I will continue to watch for further selling on much heavier volume.
Don’t forget, right now, we are now looking for a follow-through day within the next seven days (ten is OK too) of a gain of 1.7% on higher volume. To be honest, I wouldn’t be looking too hard for this to happen. I am pretty sure….like by 100%….that there would be a ton of more stocks setting up in beautiful green sound chart patterns in sectors moving up the list. Guess what? That is not happening.
For the week, the DJIA led to the downside with a 1.4% haircut, the NYSE fell 1.2%, the SP 500 fell 1.1%, and the Nasdaq and SP 600 held up well only losing .6%. The IBD 100 managed to not swoon either, only falling .8%, in what was a wild and confusing week overall for the majority of market players. To me, the week, can be wrapped up in one word: failure. A failure for the market to produce a follow-through and a failure on the markets part to show me that it really wants to resume its four year bull market.
All the talk this week was of the subprime market. And who can blame everyone? The fact that stocks like AHM NDE NEW LEND and many many other stocks with subprime problems got killed is just stunning. But what I find more stunning is the action in LEND. That must of have been a daytraders dream (too bad that is all it normally is for that sub-group) as the stock fell 80% in seven days and then rallied 170% the next three days. Obviously, the intraday players, did not nail all these gains. But the few smart swift traders out there that were able to play these moves correctly made a mint. And when I mean a few, I mean a few. I monitor over 30 chat rooms and I saw the majority of the trades. They were not winning trades. I am still stunned that newbies try to play this stuff without the basic rudimentary knowledge of this stupid game.
The only good part about all of this is the fact that TA worked well, once again, in saving your behind from huge losses. The only way not to lose 99% (like in NEW) is to cut your losses short. Cutting a loss with a 5% to 10% loss is the ONLY insurance you have against stocks like NEW AHM NDE and the bunch. The even more wonderful ability of TA comes in the form of Homebuilding stocks. These stocks topped last year at the beginning of 2006 and ALL rolled over on heavy volume during the summer of 2006. Now we have all this horrible news in the homebuilding market with the DHI CEO going so far as to say his business is going to “suck.” TA, you are the greatest thing EVER for the individual investor in the stock market; thank you (yes that was rhetorical and a bit nutty).
The trend is still in place, after this week. The pattern of higher volume sell-offs and lower volume rallies continued this week and that pattern has created a very negative picture. To look at it this way, just think, the Nasdaq is the only index with a Acc/Dist rating of D+ or better, with a C-. All other indexes are in the D range. Real strong powerful market bottoms do not occur when this grade is a D in so many indexes. It appears more time is still needed before anything exciting is to happen. This market is still ugly.
The ugliness comes in the form of all the red on my charts, the nasty acc/dist patterns in the index and stocks, the few new longs that appear on my scan, the NO new CANSLIM longs on my scans, the increase in shorts in my short scan, the nasty breakdowns in all of the old leaders, and the fact that one of the top two indexes the past three months has been the US Defense index. This is the best chart out there and it has gained 4.81% the past three months. This leadership shows that the market is in clear defensive mode and that this is not the time to be looking to go 200% all-in.
But I must say the possibility that a bottom could occur still exist. I am still long around 170 stocks and even though I am not finding much new that often there are still gems out there like FALC and TESOF that are as pretty as can be. I would think that if this market was about ready to really breakdown and crash that I would not still be long 170 stocks. The number would be under 100. Maybe the number will fall under 100 soon. But for now the fact that I am long 170 stocks means that I am long 170 stocks in clear uptrends that have NOT violated my complete cut loss or complete profit taking rules. So we must be ready for anything. However, I am leaning heavily, very heavily, for lower prices. I expect to be selling off more longs in the near term. But if we rally, I will be ready to make more money.
Especially with the FOMC meeting coming up. I am sure this will be market moving news, as it typically is, but everyone is pretty much for sure that rates will be left the same at 5.25%. The one fact I am sure of is that we will not see the Fed lower rates. The inflation number and worries are still too prevalent in this market for them to be taking such action. The CPI is still growing too fast for the Fed to make that decision. But hopefully, after Wednesday, we can get a better trend going and actually get some real follow-through to the downside or upside. The choppy action is not the best market for me to make money in.
The most important thing to remember, this weekend, when you are getting wasted, is that ALL bear and consolidating markets eventually turn into bull markets. Even in severe bear markets, there will be many rallies of 10-20% on the indexes where you can get some handful of stocks that produce 50%-100% gains. This is because the VIX will be up and every downtrend always overshoots itself.
Patience and hard work = success. Patience and a little bit of hand sitting in this market = success. Trust me, the majority of people will flip and burn their account here. The best and most sound advice right now is to be cash heavy. CASH IS KING!!!
Aloha, enjoy your St. Patrick’s Day, and I will see you in the chat room.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
PTT 405% - 11/16
KNOL 273% - 1/12/06
SVNT 142% - 8/24
TTEC 131% - 8/25
AOB 123% - 9/12
LTS 119% - 1/11
CCOI 117% - 9/27
ICE 115% - 9/21
CPA 110% - 9/15
CHINA 105% - 8/16
HMSY 103% - 6/23
IHS 103% - 12/21/05
CLEC 99% - 9/25
OMTR 96% - 9/15
ACP 92% - 11/13
IGLD 90% - 10/26
GVP 79% - 11/20
BAM 78% - 11/17/05
ULTR 77% - 10/27
IMKTA 76% - 8/28
HRT 76% - 10/23
NEXC 72% - 10/25
ACY 70% - 2/5
JST 70% - 10/13
TNH 69% - 10/26
BMA 68% - 10/24
HURN 68% - 9/13
FTEK 67% - 10/6
BONT 66% - 10/3
AOI 65% - 11/19
DA 64% - 1/25/06
XIDE 60% - 1/29
CXW 59% - 5/19
IIVI 59% - 8/30
MEMY 59% - 12/21
AMAG 49% - 11/7
CCBL 46% - 10/26
GLDN 45% - 11/21
ORBC 47% - 1/4
SNCR 50% - 12/13
BMTI 56% - 10/25
FTGX 52% - 12/4
PSPT 49% - 8/14
PCCC 60% - 10/26
MOS 48% - 10/12
IMMU 51% - 12/19
TYL 49% - 2/1/06
ECGI 50% - 10/20
To view the market commentary from the top on 2/27 top, click here.
Preview of current "Daily Market Analysis" Posting:
It was a weird sluggish session, today, but in the end it was another typical quadruple-witching Friday. However, there was plenty of data for Wall Street to go through, despite this once a month event. The CPI rose a little over .4%, a bit higher than the .3% estimate. But the core prices came in line rising .2% for a year over year change of 2.7%. Industrial production jumped 1% in February, over the readings for a .3% increase and its largest increase since November. Michigan consumer confidence fell (are you surprised there?) to 88.8. Add the fact that oil fell below $58 and might have thought it would have been a more exciting day. Nope. Quadruple-witching ruled the day.
At the close, the SP 400 led to the downside with a .55% loss, the DJIA, SP 500 and SP 600 closed .4% lower, the Nasdaq fell .3%, and the NYSE held up the best only falling .2%. The IBD 100 fell .6%, leading all the indexes lower. There is really nothing to read of that, however, as this was just that kind of day where you really can not draw any conclusions about underlying weakness or strength amongst the indexes.
Volume was higher on the NYSE by about 35% and higher on the Nasdaq by 20%. Breadth was negative on the NYSE, with decliners over advancers by a 5-to-3 margin. On the Nasdaq, losers beat winners by a 3-to-2 margin. New highs beat new lows by a 114 to 96. But the Nasdaq still has more lows to new highs; 64 new lows - 34 new highs.
All of the increase in the volume can be directed completely to the quadruple-witching action. The higher volume, with the price declines over .2% would normally be a clear distribution day. That would send a warning signal up that this rally has a much higher chance of failing. But I find it hard to draw conclusions on days like today so I will continue to watch for further selling on much heavier volume.
Don’t forget, right now, we are now looking for a follow-through day within the next seven days (ten is OK too) of a gain of 1.7% on higher volume. To be honest, I wouldn’t be looking too hard for this to happen. I am pretty sure….like by 100%….that there would be a ton of more stocks setting up in beautiful green sound chart patterns in sectors moving up the list. Guess what? That is not happening.
For the week, the DJIA led to the downside with a 1.4% haircut, the NYSE fell 1.2%, the SP 500 fell 1.1%, and the Nasdaq and SP 600 held up well only losing .6%. The IBD 100 managed to not swoon either, only falling .8%, in what was a wild and confusing week overall for the majority of market players. To me, the week, can be wrapped up in one word: failure. A failure for the market to produce a follow-through and a failure on the markets part to show me that it really wants to resume its four year bull market.
All the talk this week was of the subprime market. And who can blame everyone? The fact that stocks like AHM NDE NEW LEND and many many other stocks with subprime problems got killed is just stunning. But what I find more stunning is the action in LEND. That must of have been a daytraders dream (too bad that is all it normally is for that sub-group) as the stock fell 80% in seven days and then rallied 170% the next three days. Obviously, the intraday players, did not nail all these gains. But the few smart swift traders out there that were able to play these moves correctly made a mint. And when I mean a few, I mean a few. I monitor over 30 chat rooms and I saw the majority of the trades. They were not winning trades. I am still stunned that newbies try to play this stuff without the basic rudimentary knowledge of this stupid game.
The only good part about all of this is the fact that TA worked well, once again, in saving your behind from huge losses. The only way not to lose 99% (like in NEW) is to cut your losses short. Cutting a loss with a 5% to 10% loss is the ONLY insurance you have against stocks like NEW AHM NDE and the bunch. The even more wonderful ability of TA comes in the form of Homebuilding stocks. These stocks topped last year at the beginning of 2006 and ALL rolled over on heavy volume during the summer of 2006. Now we have all this horrible news in the homebuilding market with the DHI CEO going so far as to say his business is going to “suck.” TA, you are the greatest thing EVER for the individual investor in the stock market; thank you (yes that was rhetorical and a bit nutty).
The trend is still in place, after this week. The pattern of higher volume sell-offs and lower volume rallies continued this week and that pattern has created a very negative picture. To look at it this way, just think, the Nasdaq is the only index with a Acc/Dist rating of D+ or better, with a C-. All other indexes are in the D range. Real strong powerful market bottoms do not occur when this grade is a D in so many indexes. It appears more time is still needed before anything exciting is to happen. This market is still ugly.
The ugliness comes in the form of all the red on my charts, the nasty acc/dist patterns in the index and stocks, the few new longs that appear on my scan, the NO new CANSLIM longs on my scans, the increase in shorts in my short scan, the nasty breakdowns in all of the old leaders, and the fact that one of the top two indexes the past three months has been the US Defense index. This is the best chart out there and it has gained 4.81% the past three months. This leadership shows that the market is in clear defensive mode and that this is not the time to be looking to go 200% all-in.
But I must say the possibility that a bottom could occur still exist. I am still long around 170 stocks and even though I am not finding much new that often there are still gems out there like FALC and TESOF that are as pretty as can be. I would think that if this market was about ready to really breakdown and crash that I would not still be long 170 stocks. The number would be under 100. Maybe the number will fall under 100 soon. But for now the fact that I am long 170 stocks means that I am long 170 stocks in clear uptrends that have NOT violated my complete cut loss or complete profit taking rules. So we must be ready for anything. However, I am leaning heavily, very heavily, for lower prices. I expect to be selling off more longs in the near term. But if we rally, I will be ready to make more money.
Especially with the FOMC meeting coming up. I am sure this will be market moving news, as it typically is, but everyone is pretty much for sure that rates will be left the same at 5.25%. The one fact I am sure of is that we will not see the Fed lower rates. The inflation number and worries are still too prevalent in this market for them to be taking such action. The CPI is still growing too fast for the Fed to make that decision. But hopefully, after Wednesday, we can get a better trend going and actually get some real follow-through to the downside or upside. The choppy action is not the best market for me to make money in.
The most important thing to remember, this weekend, when you are getting wasted, is that ALL bear and consolidating markets eventually turn into bull markets. Even in severe bear markets, there will be many rallies of 10-20% on the indexes where you can get some handful of stocks that produce 50%-100% gains. This is because the VIX will be up and every downtrend always overshoots itself.
Patience and hard work = success. Patience and a little bit of hand sitting in this market = success. Trust me, the majority of people will flip and burn their account here. The best and most sound advice right now is to be cash heavy. CASH IS KING!!!
Aloha, enjoy your St. Patrick’s Day, and I will see you in the chat room.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top performing holdings - date of signal (entry next morning)
PTT 405% - 11/16
KNOL 273% - 1/12/06
SVNT 142% - 8/24
TTEC 131% - 8/25
AOB 123% - 9/12
LTS 119% - 1/11
CCOI 117% - 9/27
ICE 115% - 9/21
CPA 110% - 9/15
CHINA 105% - 8/16
HMSY 103% - 6/23
IHS 103% - 12/21/05
CLEC 99% - 9/25
OMTR 96% - 9/15
ACP 92% - 11/13
IGLD 90% - 10/26
GVP 79% - 11/20
BAM 78% - 11/17/05
ULTR 77% - 10/27
IMKTA 76% - 8/28
HRT 76% - 10/23
NEXC 72% - 10/25
ACY 70% - 2/5
JST 70% - 10/13
TNH 69% - 10/26
BMA 68% - 10/24
HURN 68% - 9/13
FTEK 67% - 10/6
BONT 66% - 10/3
AOI 65% - 11/19
DA 64% - 1/25/06
XIDE 60% - 1/29
CXW 59% - 5/19
IIVI 59% - 8/30
MEMY 59% - 12/21
AMAG 49% - 11/7
CCBL 46% - 10/26
GLDN 45% - 11/21
ORBC 47% - 1/4
SNCR 50% - 12/13
BMTI 56% - 10/25
FTGX 52% - 12/4
PSPT 49% - 8/14
PCCC 60% - 10/26
MOS 48% - 10/12
IMMU 51% - 12/19
TYL 49% - 2/1/06
ECGI 50% - 10/20
Saturday, March 10, 2007
Stocks Close Slightly Higher, Ending A Week Of Low Volume Gains; Beautiful Charts Still Do Not Exist
Market Commentary At Big Wave Trading Bronze Level One.
Preview of current "Daily Market Analysis" Posting:
Stocks gapped higher off a mixed jobs report. Total jobs for the month came in at the lowest level in two years but the unemployment data dipped to 4.5% from 4.6% and last months numbers were revised up continuing a recent pattern, possibly giving market players a bit of buying power. The gap higher then led to an immediate selloff, followed by a weak rally, that led to even more lows. However, at the end stocks actually caught a late bid, helping them close off the lows. A pattern that did not exist the rest of the week. The prevailing pattern, before Friday’s close was to rally until the final hour then either selloff or flatline. This is bearish action and combining that with the low volume rally puts and end to a dead-cat bounce week.
**THIS WAS POSTED ON TUESDAY, AFTER THE MARKET STARTED ITS CORRECTION. I AM NOT SURE HOW MANY OF YOU READING THIS KNOW THAT THIS IS A TOP. BUT IT IS. ONCE AGAIN, I HAVE NAILED A SIGNIFICANT TURN IN THE MARKET (FOR THE 8TH YEAR IN A ROW). TO SEE SOME OF MY TOP PERFORMING STOCKS SCROLL FURTHER DOWN**
New Swing Longs: Silver Level Two
Look below to see the kind of returns you can expect with my service. These returns are constant. I have been making money every year, in every market condition, since 1996. Bull or bear? It doesn't matter when you have a sound game plan with history on your side.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date of signal (purchase the next morning)
PTT 356% - 11/16
CVO 180% - 8/17/05
TRCR 161% - 1/12
TTEC 151% - 8/25
OMTR 121% - 9/15
CCOI 111% - 9/27
ACY 111% - 2/5
MA 108% - 8/2
ACP 95% - 11/13
TNH 90% - 10/26
BONT 83% - 10/3
HMSY 75% - 10/6
CHINA 74% - 8/16
HRZ 73% - 9/27
CPA 72% - 9/15
AOI 72% - 11/19
HURN 71% - 9/13
ULTR 68% - 10/27
IGLD 65% - 10/26
JSDA 60% - 12/20
IMKTA 59% - 8/28
FTEK 56% - 10/6
NEXC 56% - 10/25
PRGX 56% - 1/12
CXW 54% - 5/19
EVEP 53% - 11/06
IIVI 49% - 8/30
BMA 49% - 10/24
KHDH 45% - 5/30
DECK 47% - 9/13
Preview of current "Daily Market Analysis" Posting:
Stocks gapped higher off a mixed jobs report. Total jobs for the month came in at the lowest level in two years but the unemployment data dipped to 4.5% from 4.6% and last months numbers were revised up continuing a recent pattern, possibly giving market players a bit of buying power. The gap higher then led to an immediate selloff, followed by a weak rally, that led to even more lows. However, at the end stocks actually caught a late bid, helping them close off the lows. A pattern that did not exist the rest of the week. The prevailing pattern, before Friday’s close was to rally until the final hour then either selloff or flatline. This is bearish action and combining that with the low volume rally puts and end to a dead-cat bounce week.
At the close, the SP 600 led the way with a .4% gain, the SP 400 followed recapturing its 50 dma with a .35% gain, the NYSE picked up .2%, the SP 500 was higher by .1%, and the Nasdaq diverged to the downside with a very tiny .01% loss. The IBD 100 failed to lead to the upside, with a .3% gain. This index should be outpacing all the indexes by a fair margin on rallies. The fact that it is not is not bullish for this bounce. The top sector on the day was the Computer Software-Security group (VDSI, BCSI, DMRC, SFNT, MFE, DBTK) with a 6.6% gain.
Volume was lower on the NYSE and higher on the Nasdaq (IBD says volume was lower on the Nassy). The lower volume with the gains, on the NYSE, show that institutions have no interest in buying a market that just went through such a severe selloff; at least they don’t yet. The volume on the Nasdaq really doesn’t matter if it was higher or lower. The small price changes basically leave this day as a draw for both bulls and bears.
Breadth was slightly positive on both exchanges. Advancers beat decliners by a 3-to-2 margin on the NYSE and by a 8-to-7 margin on the Nasdaq. However, a small sign of weakness can be found in the breadth of the DJIA. There were 14 advancers to 16 decliners. Maybe I am reading too much into it for a such a weak day but negative breadth with price gains are not normally bullish in the short-term. There were also 114 new highs to 80 new lows. If the market was in better shape, I would expect the difference to have been wider.
Friday was day four of the rally attempt. The best rallies almost all start on the fourth or fifth day and when they rally they make HUGE point gains on big volume. The fact that we did not get a follow-through today doesn’t mean we still can’t get one in the next six to nine days. But the fact that this one did not start early increases the odds of it either being a weaker rally if we get one or that we are setting up for more distribution. Even if we get a follow-through nothing says that it will succeed. All market rallies start with a follow-through day. But not all follow-through days guarantee a bull market. I think no matter what happens, the way the charts look, this rally either will not happen or it will fail.
I say this because I don’t have nice charts out there. I always have nice and pretty charts setting up with good fundamentals and with poor fundamentals, before a real rally takes hold. Without these charts, there is no reason for a rally to appear. Also the Accumulation/Distribution ratings on the index charts are horrible. During the rally this week, the grades fell! You don’t get that at real market bottoms. When the March 2003 rally got underway, the Acc/Dis ratings were a B+ or better on all indexes. Right now, there is a D- out there on the IBD 100 and the SP 500. The NYSE also carries a D and the Nasdaq has a C. This shows that there is still heavy selling by funds. Until the funds start buying stocks, these grades will stay low. So until the market gets some better figures, don’t count on any rally really succeeding and producing big gains. History shows that to be the case; not my personal opinions.
For the week, the DJIA and SP 600 led the way with 1.3% gains, the SP 400 and 500 rose 1.1%, and the Nasdaq gained .8% this week. This seems good after a selloff but remember the Nasdaq lost 5.9% last week. A gain of less than 1% after a 6% loss is not what I would call healthy. The IBD 100 gained 2.5% for the week, well outpacing the other indexes. But just like its Nassy brother, the 2.5% gain pales in comparison to the 9% swoon of last week. It is hard to call this weeks rally anything but an oversold dead-cat bounce. There is simply no other way for me to interpret this action. If this was a real buying opportunity, more charts would appear and volume would be much higher on the indexes. Where are the big boys? They are possibly waiting to sell at higher prices waiting for the dead-cat bounce to end.
It was a crazy week that started with a big selloff and ended with a continuation of a dead-cat bounce. The low volume gains after such a nasty week did nothing to change my opinon on this market. The current market condition I have been writing about since last Tuesday’s selloff is still in place. It doesn’t matter if the subprime mortgage loans or yen carry trade was the reason for the selling. God knows most ignorant journalist seemed to place blame on these two catalyst. What matters is the fact that this market sold off hard last week, rallied on poor volume this week, and didn’t produce squat for charts that signals to me it was a one-time selling event last week. The only real good news I can see is that oil fell back to $60 a barrel. But the stupid commodity has not fallen below that since February so I am not that stoked over that bit of data either.
This market is still not the kind of market I like to operate in. I am still taking longs whenever I can find a pretty green chart that is breaking out of a proper pattern but they are few and far between so that is naturally keeping my cash level high. As I continue to take profits and cut losses on weaker performing stocks, the cash that is raised is getting ready to be put to use in better trade opportunities. If this market rollsover on higher volume, I can start shoring all these ugly chart patterns and show you guys how to make money consistently on the short side. Or if the market rallies and charts start building green pretty bases I can have money ready to deploy into these sweet patterns. Then I can go back to making money like the good old days of normal bull markets. Remember, this last upleg from August was the weakest bull ever with only 180 stocks making 100% gains out of a universe of 8000. The norm at the start of bull markets to the first correction is around 500-1000 or more. That is where I find my handful of 200-500% winners and double fisted 100% winners. Not on rallies like we just saw. Thank God that is over!
This oversold bounce probably still has a while to go as the readings on Helene Meisler’s overbough/oversold indexes are still very oversold. That is sure to lead to continued wild and choppy intraday price action that results in poor performance from individual stocks. Daytrading is safer than holding stocks right now. This is ONLY the case in these kind of wild and choppy markets. Unitl the trend is firmly down or firmly up via a follow-through day, cash is the appropriate place for investments. When a solid trend develops, then that is where I will be. For now I am just counting my chips waiting for a good hand. 7 2 offsuit is not a good hand. And that is all I am getting right now. Fold and wait. That is the name of the game right now: waiting with cash.
Cash is king!!!! Aloha and I will see you in the chat room.
**THIS WAS POSTED ON TUESDAY, AFTER THE MARKET STARTED ITS CORRECTION. I AM NOT SURE HOW MANY OF YOU READING THIS KNOW THAT THIS IS A TOP. BUT IT IS. ONCE AGAIN, I HAVE NAILED A SIGNIFICANT TURN IN THE MARKET (FOR THE 8TH YEAR IN A ROW). TO SEE SOME OF MY TOP PERFORMING STOCKS SCROLL FURTHER DOWN**
China’s Market Crashes Sending Shockwaves Throughout World Financial Markets; 215% Run In Twenty Months Is Not Sustainable
Stocks were crushed, Tuesday, after a meltdown in Asian markets led by the Shanghai index closing lower by 8.8% and a weak durable goods number. The Shanghai index shed almost 9% offering up its worst selloff in over 10 years. This selloff in China, which has been the leading market index the past two years, spilled over to world financial markets and had a devastating effect on ours as well. That combined with durable goods coming in 7.8% lower and missing expectations of 2.2% sent our indexes lower with the worst one day loss in four years.
At the close, the Nasdaq led the way to the downside, with a 3.9% loss, the SP 500 and SP 600 both closed lower by 3.5%, and the DJIA fell 3.3%. The DJIA was down at one point today by 546 points. That was the worst one day loss since 9/17/01. So the DJIA down 416 points is really a blessing, if you compare it to what could have happened after those sell orders hit this market. The worst news came from leading stocks. The IBD 100 fell 5.8%, easily outpacing the broad market. Leading stocks leading this much to the downside is very bearish. This is horrible action and is something to pay attention to, if you refuse to take some stock in. The fact that ALL of the major indexes are ALL trending below their 50 day moving averages should also cause you some real concern. The fact that all are below this line is something you need to pay attention to. The best rallies do not happen with these indexes ALL under their 50 dma. This was the first time the SP 500 has been under the 50 dma since August 15th.
The SOX index also lost 3% today, erasing all of the previous gains it had last week. However, that was not the worst area of the market, as Steel, Metal, Solar, and Chinese stocks got drilled. The Steel-Specialty Alloy group tanked 7.8%, the Steel-Producers lost 7%, the Metal Ores lost 7%, and Energy-Other (Solar) lost 6%. The biggest hit chinese stocks were ACH (down 14%), MR and HMIN (down 13%), CHL (down 10%), and EDU (down 8%). This is where the blood was today.
All of the 197 industry groups in IBD were in the red by the end of the day, only 3 out of 500 SP 500 stocks finished in the green, only 8 out of my 282 longs (now down to 230) were green, and all 30 DJIA stocks were in the red. This was about as ugly of a day as you can get.
Volume was much higher on the NYSE and the Nasdaq. The volume on the NYSE (I can not confirm this) is supposed to be a record for the highest total ever (I got this from IBD). The extremely huge increase in volume along with the horrible losses gave a clear distribution day. In my brain, you might as well call this two distribution days, as it was that bad from my perspective. To go along with the huge distribution in the indexes, breadth was horrible. Breadth was negative on both the NYSE and the Nasdaq by a large margin. Decliners beat advancers by around an 8-to-1 margin on the NYSE and decliners beat advancers by around a 13-to-2 margin on the Nasdaq. This was some of the worst breadth and selling since 1987.
Today is the day I have been waiting for for at least a month and a half now. I have been warning everyone of all the problems with this bull market since early January and it has now come to prove to us that everything we were troubled with was in fact worth being troubled over. A 215% gain in China in 20 months is simply impossible to maintain. This was the most picture perfect bubble since the DJIA ‘28-’29 and the Nasdaq ‘99-’00 markets. After such a parabolic run this was obviously going to happen sometime soon. I had a feeling it would be soon, based on the current Shanghai chart and I was proven correct. All three charts simply looked exactly the same on the 20 month run-up leading to a selloff.
To me, this four year rally, is officially over. All of the gains for 2007 were given back in one day today. All of the climax runs in individual stocks recently, with all the poor quality new long candidates, with the bubble in China, and the low VIX with poor returns on longs in our bull market all signaled that the rally was getting near the peak. And it looks like today we have that peak, for now. Protecting profits is now the new game in town. The game was the same since July/August–try to make as much money as possible on longs that are breaking out from solid chart patterns. The game now is to not buy stocks and instead to protect the profits you already have and accrued during this run. Today’s selloff was so extreme, after such a sedated, boring, low VIX rally that the bull market has to be called off.
Tons of stocks I am holding on to that are still above their key important support lines are not as pretty as they once were. Many stocks that I own that are holding above support are doing so by only a small amount and their chart patterns look a lot more messy than they did before today. There are very few pretty charts with tons of max green BOP left out there after today. The ones that are out there may still have max green BOP but the price declines are starting to overshadow that. Price and volume action is way more important than a chart staying green. I don’t care if the chart is green, if my stock is down 20% (LMRA I am looking at you).
It may be months (at least 2 to 3) before the stock charts get pretty again. But while most people lose money trading this market, we will be in cash or getting ready to go short stocks if the trend continues to the downside. Selling stocks that are breaking down now is a lot more smart than “hoping” and “wishing” for a bounce. A bounce can be expected in a bull market. Panic selling then is very silly. However, panic selling in a bear market off the first big down day normally pays off much more than holding on and “hoping” for a rally. The one thing you should take comfort in, no matter what, is the fact that while there will be some dumb dip-buying in the coming days based on a “gamble” that the market will bounce, we will not be dumb enough to play this game and will instead be on the sidelines enjoying the upcoming extremely wild and choppy trading that is about to take hold.
There are two interesting statistics I saw today that indicate that we may have seen a peak in the selling based on levels of fear. The ARMS index hit a 10 today; those are levels that have not been seen since the 1987 crash. That shows there was some extreme panic driven selling going on today. And trust me I saw it in the chat rooms I monitor. Some people went very long stock the past couple of weeks and were handed a major whooping today. The other number that jumped at me was the IBD put/call number. The put/call ratio jumped to 1.49. I believe that is the highest level I have seen in over a year, at least. Most of the time these numbers are all very bullish. But normally you see these numbers after a major selloff. The put/call was already high coming into today and history shows that high numbers on this index work best AFTER a bear market. These contrarian numbers have a much lower reliability in bull markets. So the high ARMS and put/call numbers could just be noise. The fact is we simply do not know. But these numbers are something to keep in mind, if we see buying come into the market. However, if the market continues to selloff, don’t blame the put/call or the ARMS index; you should be paying attention to price and volume. Not these secondary indicators.
Speaking of secondary indicators, the VIX had a huge 64%!!!! jump to the 18 area. That was about the only positive I could draw on a day like today as a higher VIX will help us make more money the next time the market decides to rally. This whole rally from the June lows in the DJIA produced only 180 stocks up 100% or more. That simply makes this the worst bull market I was ever a part of. Normal bulls, I have said over and over, produce 500-1000 during a run like we saw on the indexes. A VIX around 20 or 30 when the next bull market starts would definitely give us many more 200-500% gains; instead of the 50-100% gains we got during this last bull run.
I saw today that the chances on the fed futures market of a rate decrease the next meeting rose to around 70%. I see that some see this as positive. I hate to burst your bubble people but the last thing you want to see is stocks selling off and the Fed cutting rates. Why? Because that is as clear as anything the fed could say about the economy. By cutting rates, they are telling you that the economy has slowed down and that they need to fix it. They wouldn’t need to cut rates, if the economy was on fire. So don’t take this talk as bullish, like most amateurs do. The fed KNOWS there is real weakness when they cut rates. That is why they cut them.
This market has definitely left a lot of traders confused. Some believe they should buy the dip since every buy-the-dip trade has worked since 2003. However, this dip has a totally different feel to it. I can only hope that you can see the difference, this time. There may be a bounce but off of this much selling, trust me, I would not expect it to last long. If we do recapture all-time highs, that would be extremely bullish, unless it is on lower volume. That would be really ugly divergence. Anyways, once again, even if we do rally my charts are ugly now. Ugly charts simply DO NOT make substantial gains. Pretty charts make BIG GAINS. Ugly charts reverse and go lower.
Raise cash, only hold stocks acting perfectly (like nothing is wrong with the market at all), keep new buys extremely small if you are an experienced investor, and do not go long right now if you are a newbie. If you don’t know if you are a newbie, then you are a newbie. Unless you have clear cut loss or sell signals, do not sell out your stock completely. The fact that your strong stock is showing strength in a bad market says a LOT. The one thing I am extremely sure of is that all traders should get off margin on your long positions.
We shall see what happens tomorrow. I bet on some stability but we will see what we get in China tonight.
Resistance and cash are king!! Aloha and I will see you in the chat room.
New Swing Longs: Silver Level Two
Look below to see the kind of returns you can expect with my service. These returns are constant. I have been making money every year, in every market condition, since 1996. Bull or bear? It doesn't matter when you have a sound game plan with history on your side.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date of signal (purchase the next morning)
PTT 356% - 11/16
CVO 180% - 8/17/05
TRCR 161% - 1/12
TTEC 151% - 8/25
OMTR 121% - 9/15
CCOI 111% - 9/27
ACY 111% - 2/5
MA 108% - 8/2
ACP 95% - 11/13
TNH 90% - 10/26
BONT 83% - 10/3
HMSY 75% - 10/6
CHINA 74% - 8/16
HRZ 73% - 9/27
CPA 72% - 9/15
AOI 72% - 11/19
HURN 71% - 9/13
ULTR 68% - 10/27
IGLD 65% - 10/26
JSDA 60% - 12/20
IMKTA 59% - 8/28
FTEK 56% - 10/6
NEXC 56% - 10/25
PRGX 56% - 1/12
CXW 54% - 5/19
EVEP 53% - 11/06
IIVI 49% - 8/30
BMA 49% - 10/24
KHDH 45% - 5/30
DECK 47% - 9/13
Sunday, March 04, 2007
China’s Market Crashes Sending Shockwaves Throughout World Financial Markets; 215% Run In Twenty Months Is Not Sustainable
Market Commentary At Big Wave Trading Bronze Level One.
Preview of "Daily Market Analysis" Posting:
**THIS WAS POSTED ON TUESDAY, AFTER THE MARKET STARTED ITS CORRECTION. I AM NOT SURE HOW MANY OF YOU READING THIS KNOW THAT THIS IS A TOP. BUT IT IS. ONCE AGAIN, I HAVE NAILED A SIGNIFICANT TURN IN THE MARKET (FOR THE 8TH YEAR IN A ROW)**
New Swing Longs: Silver Level Two
Look below to see the kind of returns you can expect with my service. These returns are constant. I have been making money every year, in every market condition, since 1996. Bull or bear? It doesn't matter when you have a sound game plan with history on your side.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date of signal (purchase the next morning)
PTT 405% - 11/16
KNOL 273% - 1/12/06
SVNT 142% - 8/24
TTEC 131% - 8/25
AOB 123% - 9/12
LTS 119% - 1/11
CCOI 117% - 9/27
ICE 115% - 9/21
CPA 110% - 9/15
CHINA 105% - 8/16
HMSY 103% - 6/23
IHS 103% - 12/21/05
CLEC 99% - 9/25
OMTR 96% - 9/15
ACP 92% - 11/13
IGLD 90% - 10/26
GVP 79% - 11/20
BAM 78% - 11/17/05
ULTR 77% - 10/27
IMKTA 76% - 8/28
HRT 76% - 10/23
NEXC 72% - 10/25
ACY 70% - 2/5
JST 70% - 10/13
TNH 69% - 10/26
BMA 68% - 10/24
HURN 68% - 9/13
FTEK 67% - 10/6
BONT 66% - 10/3
AOI 65% - 11/19
DA 64% - 1/25/06
XIDE 60% - 1/29
CXW 59% - 5/19
IIVI 59% - 8/30
MEMY 59% - 12/21
AMAG 49% - 11/7
CCBL 46% - 10/26
GLDN 45% - 11/21
ORBC 47% - 1/4
SNCR 50% - 12/13
BMTI 56% - 10/25
FTGX 52% - 12/4
PSPT 49% - 8/14
PCCC 60% - 10/26
MOS 48% - 10/12
IMMU 51% - 12/19
TYL 49% - 2/1/06
ECGI 50% - 10/20
Preview of "Daily Market Analysis" Posting:
**THIS WAS POSTED ON TUESDAY, AFTER THE MARKET STARTED ITS CORRECTION. I AM NOT SURE HOW MANY OF YOU READING THIS KNOW THAT THIS IS A TOP. BUT IT IS. ONCE AGAIN, I HAVE NAILED A SIGNIFICANT TURN IN THE MARKET (FOR THE 8TH YEAR IN A ROW)**
China’s Market Crashes Sending Shockwaves Throughout World Financial Markets; 215% Run In Twenty Months Is Not Sustainable
Stocks were crushed, Tuesday, after a meltdown in Asian markets led by the Shanghai index closing lower by 8.8% and a weak durable goods number. The Shanghai index shed almost 9% offering up its worst selloff in over 10 years. This selloff in China, which has been the leading market index the past two years, spilled over to world financial markets and had a devastating effect on ours as well. That combined with durable goods coming in 7.8% lower and missing expectations of 2.2% sent our indexes lower with the worst one day loss in four years.
At the close, the Nasdaq led the way to the downside, with a 3.9% loss, the SP 500 and SP 600 both closed lower by 3.5%, and the DJIA fell 3.3%. The DJIA was down at one point today by 546 points. That was the worst one day loss since 9/17/01. So the DJIA down 416 points is really a blessing, if you compare it to what could have happened after those sell orders hit this market. The worst news came from leading stocks. The IBD 100 fell 5.8%, easily outpacing the broad market. Leading stocks leading this much to the downside is very bearish. This is horrible action and is something to pay attention to, if you refuse to take some stock in. The fact that ALL of the major indexes are ALL trending below their 50 day moving averages should also cause you some real concern. The fact that all are below this line is something you need to pay attention to. The best rallies do not happen with these indexes ALL under their 50 dma. This was the first time the SP 500 has been under the 50 dma since August 15th.
The SOX index also lost 3% today, erasing all of the previous gains it had last week. However, that was not the worst area of the market, as Steel, Metal, Solar, and Chinese stocks got drilled. The Steel-Specialty Alloy group tanked 7.8%, the Steel-Producers lost 7%, the Metal Ores lost 7%, and Energy-Other (Solar) lost 6%. The biggest hit chinese stocks were ACH (down 14%), MR and HMIN (down 13%), CHL (down 10%), and EDU (down 8%). This is where the blood was today.
All of the 197 industry groups in IBD were in the red by the end of the day, only 3 out of 500 SP 500 stocks finished in the green, only 8 out of my 282 longs (now down to 230) were green, and all 30 DJIA stocks were in the red. This was about as ugly of a day as you can get.
Volume was much higher on the NYSE and the Nasdaq. The volume on the NYSE (I can not confirm this) is supposed to be a record for the highest total ever (I got this from IBD). The extremely huge increase in volume along with the horrible losses gave a clear distribution day. In my brain, you might as well call this two distribution days, as it was that bad from my perspective. To go along with the huge distribution in the indexes, breadth was horrible. Breadth was negative on both the NYSE and the Nasdaq by a large margin. Decliners beat advancers by around an 8-to-1 margin on the NYSE and decliners beat advancers by around a 13-to-2 margin on the Nasdaq. This was some of the worst breadth and selling since 1987.
Today is the day I have been waiting for for at least a month and a half now. I have been warning everyone of all the problems with this bull market since early January and it has now come to prove to us that everything we were troubled with was in fact worth being troubled over. A 215% gain in China in 20 months is simply impossible to maintain. This was the most picture perfect bubble since the DJIA ‘28-’29 and the Nasdaq ‘99-’00 markets. After such a parabolic run this was obviously going to happen sometime soon. I had a feeling it would be soon, based on the current Shanghai chart and I was proven correct. All three charts simply looked exactly the same on the 20 month run-up leading to a selloff.
To me, this four year rally, is officially over. All of the gains for 2007 were given back in one day today. All of the climax runs in individual stocks recently, with all the poor quality new long candidates, with the bubble in China, and the low VIX with poor returns on longs in our bull market all signaled that the rally was getting near the peak. And it looks like today we have that peak, for now. Protecting profits is now the new game in town. The game was the same since July/August–try to make as much money as possible on longs that are breaking out from solid chart patterns. The game now is to not buy stocks and instead to protect the profits you already have and accrued during this run. Today’s selloff was so extreme, after such a sedated, boring, low VIX rally that the bull market has to be called off.
Tons of stocks I am holding on to that are still above their key important support lines are not as pretty as they once were. Many stocks that I own that are holding above support are doing so by only a small amount and their chart patterns look a lot more messy than they did before today. There are very few pretty charts with tons of max green BOP left out there after today. The ones that are out there may still have max green BOP but the price declines are starting to overshadow that. Price and volume action is way more important than a chart staying green. I don’t care if the chart is green, if my stock is down 20% (LMRA I am looking at you).
It may be months (at least 2 to 3) before the stock charts get pretty again. But while most people lose money trading this market, we will be in cash or getting ready to go short stocks if the trend continues to the downside. Selling stocks that are breaking down now is a lot more smart than “hoping” and “wishing” for a bounce. A bounce can be expected in a bull market. Panic selling then is very silly. However, panic selling in a bear market off the first big down day normally pays off much more than holding on and “hoping” for a rally. The one thing you should take comfort in, no matter what, is the fact that while there will be some dumb dip-buying in the coming days based on a “gamble” that the market will bounce, we will not be dumb enough to play this game and will instead be on the sidelines enjoying the upcoming extremely wild and choppy trading that is about to take hold.
There are two interesting statistics I saw today that indicate that we may have seen a peak in the selling based on levels of fear. The ARMS index hit a 10 today; those are levels that have not been seen since the 1987 crash. That shows there was some extreme panic driven selling going on today. And trust me I saw it in the chat rooms I monitor. Some people went very long stock the past couple of weeks and were handed a major whooping today. The other number that jumped at me was the IBD put/call number. The put/call ratio jumped to 1.49. I believe that is the highest level I have seen in over a year, at least. Most of the time these numbers are all very bullish. But normally you see these numbers after a major selloff. The put/call was already high coming into today and history shows that high numbers on this index work best AFTER a bear market. These contrarian numbers have a much lower reliability in bull markets. So the high ARMS and put/call numbers could just be noise. The fact is we simply do not know. But these numbers are something to keep in mind, if we see buying come into the market. However, if the market continues to selloff, don’t blame the put/call or the ARMS index; you should be paying attention to price and volume. Not these secondary indicators.
Speaking of secondary indicators, the VIX had a huge 64%!!!! jump to the 18 area. That was about the only positive I could draw on a day like today as a higher VIX will help us make more money the next time the market decides to rally. This whole rally from the June lows in the DJIA produced only 180 stocks up 100% or more. That simply makes this the worst bull market I was ever a part of. Normal bulls, I have said over and over, produce 500-1000 during a run like we saw on the indexes. A VIX around 20 or 30 when the next bull market starts would definitely give us many more 200-500% gains; instead of the 50-100% gains we got during this last bull run.
I saw today that the chances on the fed futures market of a rate decrease the next meeting rose to around 70%. I see that some see this as positive. I hate to burst your bubble people but the last thing you want to see is stocks selling off and the Fed cutting rates. Why? Because that is as clear as anything the fed could say about the economy. By cutting rates, they are telling you that the economy has slowed down and that they need to fix it. They wouldn’t need to cut rates, if the economy was on fire. So don’t take this talk as bullish, like most amateurs do. The fed KNOWS there is real weakness when they cut rates. That is why they cut them.
This market has definitely left a lot of traders confused. Some believe they should buy the dip since every buy-the-dip trade has worked since 2003. However, this dip has a totally different feel to it. I can only hope that you can see the difference, this time. There may be a bounce but off of this much selling, trust me, I would not expect it to last long. If we do recapture all-time highs, that would be extremely bullish, unless it is on lower volume. That would be really ugly divergence. Anyways, once again, even if we do rally my charts are ugly now. Ugly charts simply DO NOT make substantial gains. Pretty charts make BIG GAINS. Ugly charts reverse and go lower.
Raise cash, only hold stocks acting perfectly (like nothing is wrong with the market at all), keep new buys extremely small if you are an experienced investor, and do not go long right now if you are a newbie. If you don’t know if you are a newbie, then you are a newbie. Unless you have clear cut loss or sell signals, do not sell out your stock completely. The fact that your strong stock is showing strength in a bad market says a LOT. The one thing I am extremely sure of is that all traders should get off margin on your long positions.
We shall see what happens tomorrow. I bet on some stability but we will see what we get in China tonight.
Resistance and cash are king!! Aloha and I will see you in the chat room.
New Swing Longs: Silver Level Two
Look below to see the kind of returns you can expect with my service. These returns are constant. I have been making money every year, in every market condition, since 1996. Bull or bear? It doesn't matter when you have a sound game plan with history on your side.
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Top Holdings - Date of signal (purchase the next morning)
PTT 405% - 11/16
KNOL 273% - 1/12/06
SVNT 142% - 8/24
TTEC 131% - 8/25
AOB 123% - 9/12
LTS 119% - 1/11
CCOI 117% - 9/27
ICE 115% - 9/21
CPA 110% - 9/15
CHINA 105% - 8/16
HMSY 103% - 6/23
IHS 103% - 12/21/05
CLEC 99% - 9/25
OMTR 96% - 9/15
ACP 92% - 11/13
IGLD 90% - 10/26
GVP 79% - 11/20
BAM 78% - 11/17/05
ULTR 77% - 10/27
IMKTA 76% - 8/28
HRT 76% - 10/23
NEXC 72% - 10/25
ACY 70% - 2/5
JST 70% - 10/13
TNH 69% - 10/26
BMA 68% - 10/24
HURN 68% - 9/13
FTEK 67% - 10/6
BONT 66% - 10/3
AOI 65% - 11/19
DA 64% - 1/25/06
XIDE 60% - 1/29
CXW 59% - 5/19
IIVI 59% - 8/30
MEMY 59% - 12/21
AMAG 49% - 11/7
CCBL 46% - 10/26
GLDN 45% - 11/21
ORBC 47% - 1/4
SNCR 50% - 12/13
BMTI 56% - 10/25
FTGX 52% - 12/4
PSPT 49% - 8/14
PCCC 60% - 10/26
MOS 48% - 10/12
IMMU 51% - 12/19
TYL 49% - 2/1/06
ECGI 50% - 10/20
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