This was by far one of my most favorites week, since 2004, by far. The amount of emotion with fear, greed, and confusion was by far the most I have seen probably since the downturn in 2005. So, obviously, I must have been pulling my hair out. Right? Wrong.
The great thing about having discipline and game plans is that you are prepared for everything. When all of my new longs started failing and I noticed that all my short recommendations were working out better than longs, it became obvious something was starting to change.
Not only that but remember how I kept harping on the amount of 52-week lows were beating the 52-week highs BEFORE we sold off. I warned how that might be a problem. And walla it became a problem.
As the selloff started, I advised going to cash and those that did that were able to sit back and enjoy this wild action. Because, I have to be honest, neither bulls or bears made a lot of money. If you look at your charts you will clearly see how wild and choppy they are.
What is funny is that the shorts I mentioned before the selloff did very well. However, during the selloff, my short recommendations did very mixed if not not too well. Do you know what that means? It means it is not the correct time to short this market on full margin.
How do I know that? Well, considering that EVERY fast and long selloff in every bear market starts AFTER the top stocks have topped is the first and fast rule. The second is that my shorts are not working. I have been through enough bear moments and one nasty bear market to know when things are right. You know they are right by your shorts working immediately after you short them. With my current shorts a mixed batch with most going the wrong way the market is clearly telling us it is not time to be full hardcore bears just yet.
As long as RIMM, AAPL, BIDU, GOOG, and other leading stocks like TNH and MA not only hold their 200 day moving averages but stay in long term uptrends, there is no way a major top is going to happen right this moment. But my longs are also acting very poorly in this market so it must also be said it is no where near the right time to be full margin with longs at this juncture.
It is a waste land out there of red and wild charts. The biggest and best winners I have ever owned have NEVER came out of these kind of patterns. Take that along with there being 83 new 52-week highs to 236 new 52-week lows it is hard to get excited about a rally here when leadership is this weak. It was weak before the selloff and it continues to be weak.
During the market on Thursday I noticed that it was getting way too bearish out there with the put/call hitting 1.5 intraday and the members of my room excited by all of our shorts working so well (by the end of the day, there was no rejoicing). It was at that moment that I recommending covering 25% of all shorts across the board and that the market has probably seen the lows for the current trend.
Chris “Mahket/Market Speculator” Maye was even earlier in sensing it coming hours before me. The fact was that when you are in tune with the market it is pretty easy to get the feel for extreme moments. Before this selloff ever got started I was warning to all the parabolic and semi-parabolic charts out there. Well most have them have been cut down. But now they must fail this rally on higher volume before stocks like MA or TNH can even be thought of shorts.
Heck, did you see RIMM on Thursday and Friday. That is one of our “tells” (our leader). Does it look like it is topping? Of course it doesn’t. This will be one of the big boys I short when we enter a real bear market. For now, it doesn’t seem like that time. If this is 1998 again, like so many on CNBCrap have been saying, then you should know how the market acted to 2000.
Well, that really isn’t a good example because God knows we are not going to see a market like that again in my lifetime. But the facts remain until the leaders top, do not count your chickens before they are hatched and don’t “put your carriage before your horses.”
At the same time, until we see and pretty green charts with nice round shaped bases in stocks that have great fundamentals I see no reason to feel like you have missed the move, by missing the bottom on Thursday and 2% plus move Friday. I bet you wouldn’t miss it if we gave up all those gains. And also remember even though I am off margin and am only 10% short, 40% long, and 50% cash, I am still holding 98 different stocks that are holding key support areas, 50 and/or 200 day moving averages, or key uptrend lines.
That clearly tells you this is not that horrible of a market to be shorting. If this market was in serious trouble I would probably be only long 50 or so stocks. TRUST ME THEY WOULD PROBABLY BE IN THE LEADING INDUSTRIES DURING THE DOWNTREND. THEIR IS ALWAYS 1 OUT OF 4 STOCKS THAT BUCK THE TREND. OBVIOUSLY, IF I AM LONG, I AM IN ONE OF THOSE AND NOT HOLDING ON TO LOSERS AND RACKING UP LOSSES.
So the best advise I can give everyone right now is to continue to be patient and in cash for an established uptrend or downtrend. For an uptrend we will get a follow-through here in the next seven to ten days. For a downtrend we will start getting clear distribution days and failures at key moving averages and resistance areas. So that is what you must wait for and not be too overanxious to jump into this wild and nutty market that is making some people put on some stupid and ignorant trades OR START TO PRETEND LIKE YOU KNOW WHAT THE HELL IS GOING ON.
For all of those of you out there trying to figure why the market did this and why the market did that, I want you to know you are playing the game as amateurs and suckers. It doesn’t matter why the hell it does anything. All that matters is that it does. You need to make money off the move. NOT KNOW WHY IT HAPPENED. That isn’t EVER going to help you make money as NO TWO SITUATIONS ARE EVER THE SAME IN THE MARKET. EVER!!!! History repeats itself….but the outcome does NOT.
No comments:
Post a Comment