Tuesday, October 30, 2007

Aloha From San Fransisco; Stock Market Ends The Week The Way It Started–Putting In Extremely Bullish Intraday Reversals To Close Near/At The HOD

The market continues to do the most bullish thing it can do by dipping intraday and closing near or at the HOD. The SP 500 was the winner of the best acting index this weekend with its gap open, move lower, and close very very very close to its HOD. The action of the market the past week just simply doesn’t get much more bullish.

Anything can happen in the stock market and all the greatest traders are prepared to act immediately to a changing market. But if the market reverse from this very bullish acting week, we can expect a large selloff as the moves this week in the market were very very very bullish. All the gap lowers and higher followed by some pretty large dips all led to the market putting in bullish reversals and moving higher. I just couldn’t have asked for anything more. I doubt we will get a repeat of this week, next week.

I am really busy and have been on the GO GO since arriving and right now is no different. So I must bid you farewell for today. I will see you Monday where it will probably be a small commentary but by Tuesday I will be fully back in the saddle.

ALOHA from SF!!

Monday, October 22, 2007

Anniversary Of The 1987 Crash Sets The Stage For A Mini Stock Market Crash As Stocks Selloff On Higher Volume

Boy oh boy was it ever ugly on Friday, with the whole market selling off leaving no room to hide. When it was all over, every index lost 2% with the Russell 200 leading the way lower with a 3.2% whack. The IBD 100 loaded of leading stocks also fell 3.4%, showing that there was no where to hide. My portfolio took a 5.3% hit but overall when I look at everything I have to admit that most longs continue to look good, 75% pulled back on lower volume, and the stocks I did sell were either cheap POS stocks or were recent longs that were not large buys which saved me from major carnage. So before I go any further into my analysis I have to apologize for not getting irrational and losing my mind by panicking over a one day selloff. I simply can’t lose my cool, when everyone else is.

What made the selling worse and that has to raise our yellow flags is that volume expanded by quite a large margin on the NYSE. But volume was only slightly higher than the volume on Wednesday on the Nasdaq. So the volume was not unbelievable. Also the NYSE volume was still well below all the volume in August. So when we honestly look at the volume situation we have to admit that it was bad in the fact that volume was over the 50 day volume average on the NYSE and the Nasdaq. But with volume on the NYSE lower than the highest levels on the September rally and well below the heavy volume in August, can we really say it was that bad? And just by looking at the Nasdaq, it becomes clear that the volume was not that bad at all. Now, on top of that, remember that is was also monthly options expiration and that added to the volume. If you take out the option volume, the volume would have been either slightly below or above the 50 day volume average. It simply wouldn’t have been real distribution.

About the only commentator I see holding there own right now on CNBC that is not completely bearish is Jim Cramer. I decided to spend a lot of time watching CNBC and I swear to God the mention of 1987 occurred every 30 seconds. The other thing that quickly became apparent on all the programs was that everyone expected stocks to continue to selloff. When I combine that with the sentiment in my chat room and the other rooms I follow, it feel like we are more close to bottom than a top.

I can’t help but think back to those days in NYC in 1999-March 2000 when everything was rosy and everything seemed so perfect (which was obviously not the case-Al Quaida). Nothing was bad and stocks raced higher every day with not a bear in site except the usual perma-bears who missed the whole uptrend. Besides these few everyone wanted to be long stocks and buy them up with no regard to price. Nowadays, it seems everyone is afraid of stocks and I have a ton of subscribers that want to be short here and/or want to sell their longs. It is like they have decided to stop listening to their charts and have instead entered back into a world of amateur “gut feelings.”

Could we selloff more next week? You better believe we can. No doubt about that. But how much more selling can there be in this short amount of time when everyone is saying the market is going lower and that we should sell stocks. Did anyone see the put/call ratio on Friday? It jumped to over the fear level of 1 and closed at 1.08. I prefer to see a 1.25 to 1.5 reading to show extreme panic but the fact that the ratio is back above the 1 level shows that fear is back in the market. The VIX has also rallied from 16 to 22 in a very short period of time indicating that fear has risen very quickly. It is not like 22 is a high number and bullish for the market-it isn’t. But the fact that the VIX moved so much in a short amount of time and the put/call is up here makes it hard to get extremely bearish here.

What I would see to get more bearish would be to see more complacency, not fear. To get me really worried, the put/call would have had to have dropped to the .7 level and the VIX wouldn’t have moved. If that would have happened and the market fell 2-3%, then I would be very worried for stocks. But for now the fear has risen very quickly and just a little bit more selling could put a floor in.

For those that think I am being biased on the bullish side, all I have to say is “you have to be kidding me?” Those that have been reading me for a long time, know that I turn bearish when the trend turns bearish but I will not be a hardcore bear until the real leaders top. Then and only then will I be a “hardcore” bear that looks to short the rallies and cover off the low extremes. This bull market has existed since October 2002 making this a five year bull market. According to history, we don’t have much further to go. But everyone that understands and knows the market knows that the biggest and most powerful gains come at the very end when stocks “blowoff” in one final glory rally before it all ends. Most people are long gone as the pullbacks in February, July, and now October shake them out. Just like at the end of 1999 when the October selloff scared most longs out and had EVERYONE convinced that was the top, they were wrong then and more than likely they are wrong now.

After missing that top call, stocks took off on an amazing rally that sent stocks on their most powerful and quickest advance that rewarded those that listened to their stock charts and not the BIASED opinions of journalist. When stocks took off like that and everyone that top called in October missed out, they came in around February and bought stocks near the top. When the market pulled back THEY REFUSED to cut their loss so they wouldn’t miss out on another rally by being scared out like they were in October. Instead the pullback never bounced and neither did their stocks. I believe this must happen in this market, before we top. Right now, we are not there.

When BIDU, GOOG, and RIMM must be owned. When you are a fool to not be long anything China, solar, or a dry-bulk shipper then it will be a top. Are we there yet? I seriously don’t think so. I just don’t believe you can top when I have this many longs that are holding key support and have beautiful setups and with the public so pessimistic after one hard day of selling.

Something else everyone needs to remember is that the biggest down days for the stock market happen during bull markets. The vise versa is true in bear markets. The stock market has some of its biggest and baddest rallies in bear markets. If people do not understand this, they need to study the year 2001 and see how strong some of the one day gains were in that very bearish year. In 2003, I remember one day in June of 2003 when the markets fell 2% and everyone was sure we topped. I took a look at all my longs and noticed that so many were green and had low volume pullbacks that it was just hard to believe it. The volume was low that day but before that there was a HUGE intraday bearish reversal on HUGE volume a couple of weeks before. That made the 2% selloff look like the final nail on the head.

The other market where everyone was sure we had topped was in October of 2005. That is when I was offered a job in Chicago to run a large amount of money (I turned the job done; Maui no ka oi!!) and the fund manager was giving it up because the market DEFINITELY had topped. It was time to give up, according to him. However, my charts completely disagreed with him as many stocks were setting up in strong bases and there were a lot of charts with a lot of green BOP showing up. This does not happen in a market about ready to “give up.” Now, just like then, seems just like this. My best longs with the best chart patterns look completely fine. Even one of my longs that was a very large position (I have taken 60% of profits already) does not look like it is putting in a “for sure” top. This stock is setting up to be like TNH. TNH appeared to have definitely topped on climax runs in February and May. Yet, there it is, still chugging along but starting to look weaker and weaker. By the way, TNH is one of those stocks I am looking to short in-bulk. It is a former high-flying leader.

All of this is necessary to go over with all of you to remind you to not panic out of good charts. Trust me, if there is nothing wrong with your stock, please, you must follow the rules. You don’t want to lose a position in a stock that has the potential to be another OMTR or any of the other stocks that are listed below. Trust me, missing out on those gains, just because the stock market fell one day, is not the smart thing to do. You don’t want to be the guys in 1999, January 2004, October 2005, August 2006, or August 2007. It isn’t worth missing these kind of gains, just because you are scared of the market.

History, has proven OVER AND OVER that the best time to short stocks is five to seven months AFTER the stock has topped on its chart. The other thing that will happen is that the earnings and sales will look better than they ever have before. At the top everything looks perfect. Right now, everything doesn’t look perfect. Despite the investors intelligence survey, I truly believe by the NYSE short-interest ratio being near an all-time high and the put/call over 1 that the crowd is betting on a fall. The crowd is usually wrong and my charts are usually right. So with the odds in the favor of higher prices, I must remain long.

But, darn it, if you are sitting on any of the gains that I have listed below and have not made any sells, shame on you. That is greedy trading. Like my DRYS example, I have sold off 60%. The rest can ride. But the easy quick money has come and gone. 90% gains in two months is pretty damn good. Same with speculation stocks like ASTI and APPY. If you haven’t taken any profits, you better believe you need to take some. Just in case this is a top, you don’t want to have all your gains slip away.

However, I continue to think the crowd is too bearish and I refuse to join the camp that every other professional non-professional is in. I make my living off my charts. They don’t say it is time to be fearing lower prices. They say it is time to prepare for a possibility of lower prices. But the charts STILL tell me to fear missing more upside. These charts are still setup for more gains. Until they rollover and say “look out below,” there is no way I am jumping the gun and dumping some of these beauties. The stocks that fail quickly, dump them. GET RID OF THEM. The stocks that hold up well and pulled back on low volume with BOP still very max green. YOU HOLD THEM.

Aloha, and I will see you in the chat room, where facts trump opinions in the stock market.

top current holdings up this week: TRCR 327% DRYS 99% GMCR 66% EXM 59% KOP 54% LFL 62% MOS 252% DECK 136% KHD 208% IMA 86% CCC 83% TTG 87% OMTR 346% CRNT 100% FSLR 116% ICOC 104% IHS 224% PRGN 56% HURN 101% SFLY 90% YGE 75% ASTI 109% ANO 264% OIIM 62% BIIB 51% APPY 125%

Saturday, October 13, 2007

Stocks Recover Some Of Thursday’s Losses On Lower Volume; The Week Ends With Leading Stocks Enjoying Big Gains

Friday was not the greatest rebound you could have asked for as volume was lower than the day before and the big cap indexes did not even close up 1% each. But the Nasdaq did rise 1.2%, closing near its HOD, and the IBD 100 almost regained all of its Thursday’s losses with a 1.9% gain. Coming off the losses yesterday, we do have to admit that the action today sure is a lot better than the market to have continued to selloff–like a TON of “smart” people were expecting it to.

The fact that the market did not selloff more was really not a surprise. Even though NONE of us knew that the market was going to rally today, it was a bullish note that few of our top stocks pulled back violently on large volume. Another obvious indication that the selling was not that bad was that the only complete cut losses I had to take were in very low priced stocks with poor fundamentals. There was nothing of quality that got hurt. However, knocking on wood did not help as BLL and NILE took it on the chin today giving us two possible top stocks that have now basically failed.

Technically, both BLL and NILE are still strong longs from the correct buy points. However, in this market, I find it wise to fully concentrate your money on leading stocks that are rising. Since there are so many top stocks making great gains, even though they lack perfectly beautiful green charts, it is wise to move money into stocks moving higher out of stocks that are moving nowhere to down after a long purchase.

In strong markets, like the one we are in now, it just pays to stick with top stocks. One thing I saw a lot of after Thursday’s losses was how sure everyone was that BIDU was done. I am just not going to ever go into that camp as long as this stock remains above the 50 and 200 day moving average. There is no reason and I have no business trying to call a top in this market based on one day of selling in only one top stock. Yes, they did hit the leaders on Thursday. But the fact is that those leaders are all still well above the 50 day moving average that most big boys that have missed the stock are still probably in the bargain hunting mode looking to snatch up these stocks at discounts.

Though I never recommend doing that, it would make sense that dips are still buys here, considering how far this market has run without a real pullback following the August lows. It is amazing how strong and persistent this market is. The bad news about is that the low VIX is really cramping up my style of nailing some huge winners. The other bad part is that no nice consolidation in the indexes leads to no nice pretty max green BOP filled consolidation patterns in stocks. You can’t get a stock to go sideways long enough in this bull market without it becoming a laggard to the market making it prone to reversals and fake-out breakouts. Real long nice bases can only be created during market consolidation periods. That enables the stock to show RS to the market and then on the breakout show the RS line breaking out ahead of price showing the strength of the stock to the market.

Until we get one of these rest, it is going to be tough for me to find a lot of OMTR type of home runs. They simply aren’t there in this five year bull market. From October 2002 to January 2004 it was a lot of fun. Since then, all of my gains has been real work. It sure will be nice when the market actually puts in a top and I can operate on the bear side setting me up for some huge 1999 and 2003 gains from the next bull market. However, as long as we have all the usual top leading stocks cracking the 100, 150, 200, 300, and 500 levels we are not going lower any time soon.

Which is all the more reason it is funny that so many are trying to top call. Yes ZNH appears to have topped and, yes, JRJC appears it MIGHT have topped. But until GOOG, BIDU, FWLT, CME, RIMM, AAPL, and all the other favorites of mine show the same pattern as ERS last year and ZNH now on an arithmetic daily chart, there is no way I am going bearish on this market any time soon. Especially with this wall-of-worry that the newspaper and cable tv news media is providing. Oh yeah, and the nightly news. Sheesh, if I didn’t actually make a living off the stock market and dealt with facts ALL DAY LONG, I might actually believe the pile of shit the moron journalist on these network shows spew. However, God blessed with me with wisdom so I ignore their crap and go on with what my charts tell me. THANK GOD FOR MY CHARTS!!

Aloha and I will see you in the chat room! By the way, what a great day of college football! And how about that Indians vs Redsox game?!!! Amazing. I can’t wait to see what the NFL has for us. I hope I go 6-0-0 after tomorrow in my Fantasy Football league. That would cap off a great end to a great week…..minus BLL. I always hate to see a nice chart fail like that. ALOHA!!!

winners: OMTR 323% ZNH 289% APPY 101% ICOC 111% BCSI 118% DRYS 92% IHS 224% VDSI 224% FSLR 106% HURN 100% CNH 128% MOS 243% TTG 73% KOP 52% GTLS 68% APFC 67% RVBD 52% SFLY 84% PSMT 56% IMA 80% SXE 55% NTLS 59% MA 226% LFL 62% GMCR 59% KHD 173% DECK 134% EBIX 51% SXC 50% YGE 72% VMW 50% WRLS 117%

Sunday, October 07, 2007

Stocks End A Bullish Week On A Wildly Bullish Day For Equities; NYSE And SP 500 Hit All-Time Highs

Strong Q3 earnings from the heavyweight RIMM and a very strong payroll jobs report helped gap stocks higher in a bullish morning for stocks. The best news was that after that strong gap higher, the bulls worked their magic short-squeezing the bears the rest of the day. There was a bit of a late day pullback but the pullback barely touched the Nasdaq at all but instead hit the less important DJIA (for us anyways). The pullback that barely hit the Nassy helped it close near the highs of the day up 1.7% hitting a seven year high. The SP 500 and NYSE hit all-time highs and the DJIA hit an intraday all-time high but pulled back, like I said, at the end.

What made today’s gains clearly better was the fact that volume jumped 15% on both indexes as stocks climbed higher almost all day and the fact that a couple of top indexes put in better performances than the overall market, clearly indicating that leading and top stocks are in control in this market. The IBD 100 jumped 2.3% and the DJ Transport avg. leaped 3.3% in what was a clear showing of leadership from top stocks. This has been the case since the start of the rally and continued with Friday’s market.

This rally has been in full effect since August 29 when the market officially followed-through from the August 16 lows. Since those five weeks have passed the IBD 100 has produced a 21% gain compared to the SP 500’s 8% and the Nasdaq’s 11% gain. This goes to show you how leading stocks usually act during the bullish phases of the market. It has been a rough ride from early 2006 to August for CANSLIM investors as for the first time in a long time the strategy was not KILLING the market overall. Big caps were doing quite well actually. But now the world has come back into proper alignment and leading stocks are, once again, killing the market.

If you do not think that this was a normal thing then we can go back to May 2, 2003 when the IBD 100 was initiated. The IBD 100 is up 236.5% since then compared to the SP 500’s 65.9% gain during the exact same period. So you tell me which stocks in which index you would like to focus on? Exactly.

The only problem right here, after five weeks of such strong gains, is that most stocks are completely extended from proper buy points and there are a lot less top stocks out there worth buying. Waiting for a pullback in the top stocks to the 50 day moving average is a better play on some of these stocks as you don’t want to buy stocks that haven’t moved while this stock market has been moving.

If your stock is hitting a new high but the RS line is lagging that is probably a good indication that you are not in a leading stock. It is much better to have 10 high priced top stocks than 30 cheap lagging Chinese internet stocks that have gone nowhere. If those stocks are lagging now in such a strong market what makes you think they are going to do any better now? In fact, what do you think is going to happen to those lagging stocks when the market rolls over? Chances are if they are leading to the downside instead of the upside during a bull trend, they are going to lead to the downside during a downtrend. So avoid loading up on a bunch of sub $10 China stocks or lagging stocks.

Back to today’s market, the new highs beat the new lows, on Friday, by 526 to 67. This shows that all the problems with the new highs not being up to the past old high number is still yet nothing but another market indicator that does not have the final say against the overall price and volume action. So if too many people were worried about this indicator, now that you have MISSED the move, you can now stop worrying about your indicator. The new highs have expanded, without you. Sorry Doug Kass(trated) and Barry Ritz(or is it poor)holtz, the bears just don’t have much going for them right now. How do those guys actually make money in the market? I wonder if they really do!!

Well, I guess it really doesn’t matter how they make money. What matters is that you are making money. And if you have been going long the same stocks I have been going long, then there is NO doubt in my mind you have made some and a lot of money. My only concern is that I hope you are learning and/or know how to keep all that money you are making in these stocks.

First off, make sure any stock you have that is not a CANSLIM quality long that makes a 25% move that you take 20% off when it hits this level. What it does after that is up to you and your chart reading skills. But when risky stocks make 25,50, and 100% gains, I would take profits there. On the other hand, if you have a CANSLIM quality make a 20% gain in a few weeks, make sure you hold it for bigger gains. Like the 339% return in OMTR or the 223% return in MA. Or the short-term return of 70% in APPY. As you will see, I took profits on the way up in this one. But it has setup in another base so I am going back in. But the original gains saw me taking profits the whole way up. But for stocks like DRYS that is up 56% for me in a short period of time. Only 25% of it is gone. The rest is being held for potentially bigger gains in this top stock.

For now, all news is good news if you are long. It should continue to be that way until we get a bunch of distribution days signaling the top and we have our leading stocks go off on a rocket and put in a bunch of fireworks before reversing and crashing. When we see this, we will know all news is bad news. But for now the trend is DEFINITELY your friend. And that is the only friends I want: friends that are on my side. The bulls are our friends and until we meet real bears, the bullish trend and bulls shall remain our friend. Aloha and I will see you in the chat room.

top current holdings: ZNH 288% OMTR 339% FSLR 108% MOS 191% VDSI 199% KHD 169% CNH 113% DECK 143% MA 224% IHS 205% WRLS 116% DRYS 56% HURN 98% SFLY 93% GMCR 60% LFL 61% EBIX 54% YGE 66% ASTI 81% CPHD 64%