Saturday, December 29, 2007

Stocks End The Week Pretty Much Where They Started, While Our Emotions Went From Christmas-Joy And Happiness To Tragic Sadness Within Two Days

It was another low volume Christmas holiday week. One that happens ever year and this one, like the last, was no different with the bullish sentiment throughout the week. However, the only real action came on a day when the market fell on higher volume giving all the indexes a distribution day. Basically, we had the same situation happen this week as has been happening all year: the market rallies on lower volume, sells off on clear heavy distribution, but then somehow rallies again on lower volume.

It is a very odd pattern but it is the pattern we have to continue to deal with until this market finally decides to give it up. Which every day seems more and more likely as I continue to see stock after stock priced over $70 put in lower and lower highs. Eventually this will translate to lower and lower lows and the way a lot of high priced stocks are looking my faith that this market rallies from here is very low. To me it seems like it is inevitable that we are going lower. If I am wrong, heck, you all know me by now. I will wait till the best charts setup and breakout and I will go long. But a lot of you like predictions so I am predicting that this doesn't end well in the intermediate term.

As each day goes by the news seems to get worse and worse, yet according to my indicators the crowd that actually puts money to work in the market are not bearish at all. The put/call fell to below 1.00 again to .88, the investors intelligence survey still shows bulls over 50% at 54.9% and bears below 25% at 23.1%, and the VIX is at 20.74 which as anyone who lived through the early 2000 period will tell you is a joke. So this is bearish? I don't think so. To go along with that I see this NYSE short-interest ratio breaking out to all-time highs of 9.86--it would take ten days to cover all the shorts at the current volume--which indicates that if this market starts moving up they will be forced to cover which would send stocks higher. But maybe it can be bearish as the smart money is shorting the heck out of stocks. If that is the case and the NYSE short-interest is the smart money, this market is going to get real ugly.

That ugliness is already showing up in my charts. I ask any of you to find me one stock that has solid fundies, max green BOP recently for a long period of time, is setting up in a nice base, trades over 100,000 shares daily, and is showing proper accumulation and distribution in the base. I scan over 1000 charts a night. Trust me, if there were any I would have found them by now. I am always working. The only stock out there that was a candidate was ARL. If you look at that chart on TC2007 with my settings you will see until that "spinning top" formed a few days ago, this stock was looking great. Too bad it averages 10k shares a day, is under $12 a share, and has crap for fundamentals. This is not quality. Stocks that look like NNDS and DAR are the best we have. Those charts are "semi-hot." But sadly they are not looking great either. DAR still doesn't have max green BOP and NNDS is almost testing the 50 day moving average and is now showing me a loss on the trade. To be honest, if that chart pattern fails, that will just be one more confirmation that this market is F * * * E D.

As for the leaders...have you seen their charts? Have you taken a look at GRMN recently. Doesn't it look like it is rolling over? Do you see all the big red volume bars compared to only one green one? This is a former leader under distribution and is in the process of rolling over. And it could be forming the chart pattern EVERYONE loves to talk about that you rarely will hear me talk about BECAUSE I KNOW THAT THEY DO NOT WORK IN BULL MARKETS. We are not in a bull I would like to point your attention to the possible head and shoulders top pattern forming in GRMN. The volume is right, the price is right, and the resistance ceilings are all in alignment for a possible H&S top.

Now take a look at GOOG and RIMM. Both are failing to get to new highs but have been trying for quite a while now (if I have time I will post a chart but I don't charge enough here to do all this extra work). When you are looking at that price action, take a look at the volume. Notice how it is non existent on the rallies except for the day RIMM topped recently? The big boys are not buying up here any more. Soon without their support, these stocks are going to rollover. And if you don't believe me, try looking at your RS and MS lines on the lower pane of your TC2007 charts that I set up. You will see negative divergences not only in these two indicators but in many others.

What about the other two leaders hitting new highs? Ah, yes, AAPL and BIDU. The two invincible warriors. Well first lets look at the one not related to China. AAPL is probably in the best position as for a stock you want to continue to hold but the volume into these new high grounds is completely absent. And on a weekly it is clear that the selling in early November still trumps any volume on any rally. The RS line is confirming this stocks strength which means if you are long AAPL you should stay long. However, there is no way you can buy it up here. And that brings me to my point.

Everyone on CNBC is saying to buy AAPL. Everyone is saying that this stock is cheap and is worth paying for up here. Well, when I look at a long term arithmetic daily chart of AAPL going back to 2002, I can tell you that if you buy AAPL here you will be are risking a LOT of pain here. The chances of this extended stock rallying in this market environment is very small. The most intelligent investors will be best off just to completely avoid AAPL.

This now brings us to our last leader which has the almighty (is it really anymore now that we KNOW the GDP is overblown by at least 40%! They are only 10% of world GDP, not the 25% the doom-and-gloomers said they were) China factor caked into it. BIDU is another champ and another stock that if you are long you must continue to stay long. However, there are some clear signs that buying BIDU here would be a big mistake.

First off the price action has been very odd since November with the stock basing in December with more prominent down days than up days. And during the base, volume was quite noisy actually compared to the breakout. The breakout was on lower volume which is always a bearish development and is the first for this stock in such a magnitude. The juices seem to have been squeezed. Not only is the price and volume action all wrong, but the RS and MS lines are confirming the weakness in the stock compared to the overall market which just confirms that the stock will probably not survive this rally.

Obviously, all of my analysis is wrong if they continue to rally but something tells me that this probably will not happen. If it does happen, I will continue to declare this the most F-d up market in the history of my trading. It is just so random and can shake you out of positions so easily and I have no idea why that is.

However, I still have had a few great ones from the 2006 summer downtrend, despite the lower volume rallies in the indexes. Those beauties (HRZ AFSI TESO APPY OIIM etc...) aren't producing 200% gains in six months but that is because the VIX is at 20. If this was back in 1999 they would be much bigger. Just go and look at my past big winners in my longs section. When we get back to 2003 you are going to see 1000% gainers but even before we get there there were plenty of beautiful max green BOP filled charts that produced 100% to 500% gains during the worst bear market ever.

What is really depressing is that the worst bear market ever had much better long candidates than this one has produced so far. Stocks like NNDS might be up 5% already back in 2000 at this time. Even with the market down 50%. Take a look at some of the 2000-2000/2001 winners I am posting now. There are another six or so that have nice patterns and it will prove to you that even in bad markets there are some beautiful charts. Too bad our choppy maximum down 11% market can't produce anything other than RICK. And even then do you think RICK was screaming for the truck to back up and "load it up." It was extremely hot on October 10th I will admit but it was still a sub $12 stock so it is not like it was a for sure thing in a raging bull market where the indexes are making constant 2% gains on heavy volume. If that was the case I would have said back the truck up. It is all up to the market.

And this market just doesn't want to make anything easy which is why I believe we will be in a more 68-82 market environment than a 2000-2002 one. I see a lot of bulls and I see some hard core bears but something tells me the commodities and oil stocks are going to hold this market up for a while (I don't know how long so don't ask me, please; mahalo) and the NYSE will probably do much better than the Nassy and SP600 and 400 if this economy does break open. The bad news continues to come in.

Just today the new home sales dropped to its lowest level in 12 years which was back in April 1995. That sure is a long time and if you have signed up for the forums and have access you can see a chart of new home sales the past few years and see the huge hill that number is rolling over. The ECRI also said their LI fell 5.2% which hints at a higher chance of a recession soon. If that is the case, then the stock market is looking ahead and projecting it with all the REITs, hotel, bank, brokerage, mortgage, insurance-housing, homebuilders, and anything else related to subprimes and housing charts just looking like pure death. Have you seen SLM or ETFC lately? There are a ton of stocks that look like that. Just scan for the worst 50 stocks of 2007. You will see the damage that has been done.

But at the same time if you are going long oil stocks, natural gas stocks, and the ever home-run stocks (look at ASTIZ today) solar stocks, you are sitting pretty. I am still long FSLR but not nearly what I still should be. I hope I am not the reason a subscriber sold out of FSLR. If it is, let me know, and I will send you a gift. If you are not a plat member and your handle doesn't start with A, it IS NOT you. I continue to be long FSLR, ASTI, and SLH and I still wish I was long JASO. Oh well, 3 out of 4 is very good. But if anyone has seen a weekly chart on an arithmetic scale of FSLR, the only thing that can come to your mind is "when is this thing going to crash?"

The parabolic rise is getting quite ridiculous and the recent price action has been a bit odd with the wedging. If you draw a trendline along the lows of the September to December period, you can probably take some of your profit with a close below there but if you are not long these stocks I would not buy them here. Just like the five horseman of tech that I have talked about today, this stock has become a favorite. You might be able to buy it off the 50 dma with a low volume pullback but if you are like me and have a gain over 300% in seven months, you might want to consider locking in some profits. It sounds and feels wise. And I am sure if the stock breaks down you will wish you sold some. So make sure if you have a huge gain but you still have all of your original buy that you take some off. As Jesse Livermore said, “The big money in booms is always first made by the public – on paper… and on paper it remains.” I saw this in 2000. Please, don't let me see it again in 2008.

I just want everyone to remember that if you think you are having a hard time with this market, you need to know that you are supposed to. I know a few traders who have done exceptionally well and have been congratulated accordingly. For the newbies out there, this market is too hard to make money right now. And you have to remember even some of the best took a long time before they started to make a lot of money. One more time, Jesse Livermore said, “it took me five years to learn to play the game intelligently enough to make big money when I was right.”

If it took Jesse Livermore five years before he learned how to make the big money when he was right. What makes you think a year of casual part-time stock trading is going to produce a superior super-trader. It isn't. Please, stay realistic. You have to or else you are going to go crazy in stupid and irrational markets like this.

Besides the market, the world is a crazy place more so now due to the weaponology that exist out there making it a very dangerous place. The media constantly overblowing everything doesn't help either, but there constant negativity still hasn't affected the bullish stock investing public. When it comes to their finances they fell alright. But when it comes to what they think about everyone else, they are for sure we are going into a recession. This is one crazy market. I am just going to wait and pray for my beautiful max green charts and maybe, just maybe, another LMLP, NEWP, MRVC (from 99), TASR, FMDAY (from 03) or HRZ (06) will show up. All I can do is be patient or wait or else I am going to get myself into a lot of trouble. Now is not the time to bottom fish.

It is getting late here on Maui and I need to get some rest. I will add some more to this blog when I wake up...hopefully to some college football bowl games.

Saturday's thoughts:

-I just talked to someone in my family who is very intelligent and knows someone really close who is in the real estate industry in Miami. I have to admit that I could have sworn that these lenders were smart enough to realize that they were hurting borrowers. But from what I take of it all the real estate agents and lenders really were that stupid and ignorant to think that housing prices were going to rise forever. I know that I knew one RA here that thought the same thing but I thought he was the exception. Turned out he was the rule. It seems to me there is a LOT more pain to come.

-I have been looking over a lot of my past winners even from 2001-2003 and realize just how ugly our current market is. It is hard to remember (even though it was only four years ago) how well ALL of the chart patterns you see me buy worked then and how hard it is now. I know it is a correlation to the VIX and just have to admit that it is going to be harder to make a lot of money. But when you look below at these gains it is hard to complain I guess. I just wish it was easier to hold through the pullbacks. They don't happen as much (which is what creates a high VIX) but when they do happen they are faster and way more vicious (which is why the VIX is not at zero and we still have stocks that move).

-If there is one thing I have learned is how important it is to keep in contact with all family members. There was an incident when I was younger that happened where someone hurt themselves but complained that I punched them. It was a 4 year old girl and it caused my half-brother to charge me and create all hell that has lasted to this day. Well I just found out that 4 yr old girl is no longer a young girl and has now been diagnosed as a schizophrenic and can not even get a license to drive an automobile. That closed a book that lasted too long and healed a wound that was so unexplainable and odd that I have to share it. I am not sure why I am bringing it up but I see it correlating with stocks I seems to me that sometimes when we don't understand why a stock is moving higher or lower, but we want to know why it is doing this or that NOW. However, all of us know that it will be revealed later on but we still want to know why now. Many did not know why Enron was collapsing, many stood by when Adelphia went under, and so on. Most people watch their stock go from $60 to $5 without ever thinking of cutting their losses. Instead they just ask why? This happens all the time, no matter what year we are in.

Along the way all anyone did was ask why it was doing this and why it was falling. Just like in Tyco most did not know what was going on and had no clue why the stock was crashing and burning. This goes for any stock. But sometimes, in life and in stocks, things happen that do not make sense, are sad (when you lose money), and bring mass confusion. When you have a plan, however, none of this can effect you. You cut your losses, avoid the pain, save a lot of money, and move on to better opportunities. There are always other stocks out there and there are always other family members who are not crazy that you can share your love with. But that isn't as much the point as the question of "why?" Why is this happening? Why did she say that?? Why would they do this? It is the same thing in life and in the stock market. The best see the insanity and move on. This market is kind of like that with it not treating our stocks too well. It would be stupid to give the market all of our money when we know the market is insane and does not know what it is doing. If the stock market is flopping everywhere and we are hitting below .500, it is obvious that it is best to not have anything to do with that market

When this situation happened, in my teen years, I realized something was very wrong and no matter how messed up it was that it was just best to never speak to the cute and sweet niece again. Something was wrong with a 4 yr old!!!! and I knew at the time that it was best to cut my loss of this sweet person and leave it alone because, like a market that is crashing, something was very wrong. A niece that I loved was in fact crazy and nobody knew until much later when the diagnosis was made.

But just like in the stock market, I had to cut my losses and move on to better opportunities (other loving family members), like I said. It is just a tragic situation and I am such a chartaholic that when something like INXI, BLL, SNDA, or possibly DAR and NNDS fails, I want to know why. And maybe I will know why. But maybe, just maybe, later on I will find out that it was a crazy company with no real direction in its own little life. I know it sounds funny but this scenario matches up with the way we trade so much. There is too much to learn about this story and I wish I could explain it to really allow you to understand the insanity about it but it is sad but if you knew the full details of the story you would probably be too saddened. However, it is just another example of life imitating art. That is the art of the stock market.

Rather you realize it or not, if you do not remove yourself from bad situations (buying penny stocks in a bear market) and move on to new situations (CANSLIM stocks in bull markets), you not only help yourself but help others. You now have money that you can spend at other places of business that help those people and the cycle repeats itself. I know it is nothing profound but it is so important to realize your life impacts your trading and your trading impacts your life.

Just ask Jesse Livermore.

Trust me, you don't want the market and some of the greedy heartless Wall Street guys to take your money when you don't have to give it to them. Let the crazies play with the crazies. If you are crazy and enjoy painting the virgin Marry giving birth to Jesus in poo, go right ahead and do it. Just realize, I am never buying your $.01, 10k share a day, down trending, max red BOP filled chart. Where are all the max green BOP charts?

They are not around and that signals that we are around a bunch of crazies. Until the good guys come back, we have to avoid this niece.

I know this might sound odd to some of the regular readers but I wanted to put together this story in such a way that it was sort of goofy so as to not intensify the SERIOUS TRAGEDY this story really is. The great news is that my sister and her kids are doing wonderful, my life is really great, and most of my friends though they are all seeming to be going through rough time are all alive and have great jobs. If they weren't so lazy, maybe they could realize how great they have. Thankfully, I think they already know.

God bless you all, it has been a crazy year, and I am very happy it is coming to an end. No year was as ugly for the charts, since 2002, than this year was. This year being over only moves us one step closer to the time that we get our charts that we see in the 'past big winners' and the market treats us better. Because right now it sure isn't treating us well.

-Isn't college football great. I think this is my most favorite part of the New Year is all the College football bowl games. Which also correlates with last year's New Year's resolution: No more sports betting. Almost 365 days later: SUCCESS! Sports betting took over 1/2 of my mini-fortune that I built up investing in the market. And I am not going to let that happen again. God knows if I could I would probably destroy it all on sports. How sad is that? Pretty sad if you ask me.

top current holdings: MELI 57% ASTI 180% RICK 138% CCC 97% FCN 59% KOP 52% CNH 144% MTL 89% EBIX 114% MOS 433% AMZN 50% OMTR 335% NTLS 63% MA 325%(COH 27% CLP 31% PVH 21% SHOO 25% MI 21% ESI 20% RNT 23%)

No comments: