A weak open after a very poor employment report that showed the US lost 80,000 jobs in March with the unemployment rate moving up to 5.1%. It was a pretty lousy number but considering the fact that we had 25% unemployment after the crash of 1929 it isn't "that" horrible. But the media, with a Republican still in White House, of course, made it sound like all hell was breaking was loose.
Maybe that is why the market could not build on the weakness and instead rallied higher the rest of the day off the lows until 2pm when traders unwound some of their longs into the weekend. Overall though, it was very positive action, following a strong rally on April Fool's Day. That now makes it three constructive sessions in-a-row where stocks have held on to the gains.
Volume, however, was, once again, nowhere to be found as it came in lower for the third straight day on both exchanges. I would be A LOT more happy about the low volume consolidation if the indexes were pulling back. But they are slightly rallying on this low volume and while not bearish, by far, I still would much rather see higher volume gains and lower volume pullbacks. It is good to see that two of the three days on the DJIA have been lower. But overall they are slightly rising on lower and lower volume. Overall not a good LONG-TERM development. BUT! it is a very good short-term development as this is the first rally attempt that has not been thrown back immediately.
It is good on the short-term, obviously, because the trend is our friend and a rising market lifts a lot of high quality boats, normally. It is no different this time around as within just a few days I have gone from very few good charts to a TON of good charts. However, before we all get all happy and bullish, and start "guessing and calling" bottoms that NO ONE EVER knows is a real bottom UNTIL AFTER the fact, we still have to ask the seriously important question of "where are my HOT charts?" There still are ONLY a couple to none. In EVERY very strong bull market I have been a part of I have had two or three OBVIOUS longs and a couple more. This time around there are only a few that stick out to the point where I say "ooooooooh." And the sad thing is is that even these have problems. Ugh, nothing can be perfect. All I need is one perfect chart and I can make a lot of money being VERY CONFIDENT in loading up on the potential candidate. But those charts still are not there.
Now, that is not to say that one more month to two more months of a rally can not lead to some of these fantastic 'MONSTER STOCKS' setting up. There are a lot of charts out there now in uptrends, with heavy accumulation, and green to max green BOP. But like I keep telling you (and my paid subscribers know in a LOT more detail of why and what I like) there is just not that chart that looks like APPY and RICK of late 2007 and AFSI and TESO of early 2007 (you MUST have tcnet with BOP to see the same thing that I do. The beauty will knock your socks off). When they show up I will not hesitate to pounce and load up for the HUGE gains in a short amount of time. I will be focused on the MA 350% gains while other focus on their "value bargains" of LEH, GS, C, and other PIECES OF CRAP that are worthless in my mind. If the stock is BELOW the 50 and 200 day moving average, IT IS CRAP UNTIL IT IS NO LONGER BELOW THOSE LINES. The greatest stocks of ALL-TIME since 1880 HAVE ALL STARTED THEIR BIGGEST, FASTEST, AND LEAST VOLATILE RUNS AFTER!!!!!!!!!!!!!!!! THEY WERE ALREADY OVER!!!!!!!!!!!!! THE 50 AND 200 DMA. Those are just the facts; NOT MY OPINIONS. MY OPINIONS LIKE YOUR OPINIONS ARE WORHTLESS!
On that lovely note, some of you might be wondering what stocks I have been going long (over 25 new/adds longs were taken this week). Well, there is no way I can tell you that as with us now in an uptrend-IF WE STAY IN ONE-the stocks I am going long now are going to do 4-5x as well as the beaten down names you will read about on TSCM and watch on CNBC IF THE WORK. If they don't move up immediately, I CUT THEM IMMEDIATELY. If they do move higher, they normally go onto significant runs with some lasting as long as two years like my IHS long or over a 1 1/2 like my MA long. Or sometimes they go up 70% in 1 1/2 months like GEOI. Either way this is how I expect everything to act.
Some stocks that I am not going long at the moment that I can tell you to watch for potential big gains would be all the stocks I have gone over in my TSCM columns since the middle of March. I have been posting leading stocks for about a month now and there are many to pick from in there with proper pullbacks or new bases. Some others are just the SAME OLD names that I have already been long once before back from anywhere in 2004-2006. There are NO NEW leaders. SWN, NGS, CLR, POT, FSLR, MOS, MEE, STRA, GFA, CF, SQM, and RIG are all stocks that we should all be familiar with and here they are leading the way once again.
This kind of leadership is fine to follow but being long the stocks already up 3000% since 2003 increases your risk of a potential failure even if a stock breaks out from a base. Just look at FSLR or MEE. Those are NOT proper bases. In fact a lot of the bases in these leading stocks you will notice all have very "loud" bases (a lot of volume in the base). Obviously, those that know their history know that the best breakouts come from FRESH leadership where the volume is BONE DRY in the base. Loud volume in the base indicates a MAJOR war between big institutional bulls and bears which historically is not good for the breakout. Low volume is a clear sign that as the stock sellsoff there are no more sellers left to sell. If volume is very large on the uptrends it is the clear signal that your stock is under massive accumulation and if the volume is low on the pullbacks it is only a matter of time before prices have to rise to meet demand.
So the loud bases and low volume on the rallies in the indexes are HUGE red flags to me and will continue to keep me away from FULLY embracing this follow-through. When nobody was bullish on the late 2006 rally, I WAS (this was when one subscriber who subscribed to Rev finally had enough of losing money with Rev that he joined this site and is NOW ONE OF MY BEST CONTRIBUTORS AMONGST MY CHAT ROOM--CONGRATULATIONS VIVEK!!! I AM VERY PROUD OF YOU. YOU ARE CLOSER AND CLOSER AND CLOSER TO TAKING CONTROL OF YOUR FINANCIAL FUTURE FOREVER). One of the reasons I was bullish during that time was because during the pullback I had nearly ALL of my longs hold up. Very few violated their 200 DMA or violated their 50 DMA on huge volume. It was easy to hold for that final LAME rally up to the February 2007 top.
It is all about following the trend and the quality of that trend was much better than we have now with charts but the things that are the same is that stocks are rising now, like they did then, and volume is nowhere to be found on the indexes. So, just like I did then, I will be following this short-term trend higher with the best performing longs breaking out of proper bases or bouncing off proper support. There are a lot of long candidates out there and there are even more setting up. But I have to admit there are still less than 5 stocks that get me EXTREMELY excited out of a scanning world of 7,000-plus. That is an extremely low number, and while it ensures that I focus on the VERY best looking stocks, it still signals that the market is not very powerful and that with the low volume is a clear warning to NOT load up. It is STILL not the time to load up. So I will continue to spread myself around in a LOT OF HIGH QUALITY LONGS with excellent fundamentals, constantly purging my worst performing stocks and moving that money into stocks acting like NEU (long initiated on 2/11--pretty sure Wendy missed that one).
This speculative (due to volume being very low on the indexes) bullish action in top quality CANSLIM longs is a two-edged sword right now. The good news is that the leading stocks are leading with the IBD 100 up 6% this week compared to the NYSE's 4.5% gain. That is going to be good for our portfolios as we focus on the best. Too bad with a 22.45 VIX, and with our leaders being from sectors that have ALREADY led this market at one point or another from 2003-2006, the chances of us getting HUGE returns are less than 20%. I have been around too many uptrends to know when one will become a powerful one or a dull.
This one might start off with a bang but unless volume shows up it will just die like EVERY OTHER low volume rally ever. The good news, right now, is that the put/call is still near the 1 area at .98 right now. This number has consistently been over .80 for a very long time. Bulls are at 36% and the bears are at 37% two weeks after the extremely bullish cross (contrarian indicator). But now I see in IBD it says 56% bulls and 25% bears. That can't be right as visually it appears it is somewhere near bears 40% and bulls 39%. Whatever it is the sentiment is still in the right direction for a good rally with the investors intelligence survey and put/call ratio. The VIX NEVER confirmed a low as it NEVER hit 40 which it has ALWAYS hit before making a REAL bottom (don't argue with me over this, newbies; go look at your freaking charts going back to 1986). Back during the 1987 crash it hit 170!!!! So don't you DARE tell me the VIX is high up here at 22. THIS VIX IS PATHETIC and is what is preventing us from making HUGE gains. I have never seen a market hit a real bottom without a 40 VIX and this rally on low volume still has me thinking this.
But like I said the old leaders of steel-producers, oilgas-us expl/prod, manufacturing-farm, building-residential/commercial, chemical-fertilizer, energy-solar/coal, building-AC, oilgas-drilling, oilgas-us royalty, transport-rail, transport-trucking, and chemcial-basic. Wow, where have I seen all of these before? Oh yeah, THE ENTIRE RALLY OF 2003-2006. This is just further confirmation that this is a bull market in commodities as commodity related stocks. There is no doubt that stock related to softs and hards are where it is at. As long as that is the case the REAL big winners that launch HUGE BIG BULL markets will not show up. This explains why we have no "HOT" charts.
If you need further proof, let's look at the IBD 100. Back in the October 2002 and March 2003 bottom building phase, the IBD 100 was consistently beating the index on the way up. While that was the case on the initial big rally on Tuesday, since then the gains have been a bit mixed. What stands out more is the overall price/volume action of this leading index. The NYSE, SP 500, DJIA, and Nasdaq all have B+, B, B- ratings while the IBD 85-85 and IBD 100 carry a D. If anything, this should definitely be the other way around with the IBD indexes having B ratings and the big cap indexes with D's. This opposite effect is a clear lagging showing by the index and just another red-flag on this market.
This is why I will NOT load up. Without the IBD 100 leading, HOT stocks setting up in perfect chart patterns, and WAY MORE volume in the overall index charts, it would be CLEARLY FOOLISH to load-up and build HUGE margined out positions in this low volume environment even with the nice CANSLIM charts out there. To be safe enough to load up, those stocks AND THE INDEXES must have volume.
I focus on the leading indexes because out of 65 methodologies tracked by AAII, the CANSLIM system is the #3 top performing methodology after two other "non-system" (can't use either like CANSLIM; only CANSLIM can be applied for us basically) methods. Those two methods have returned over 2,000% since 1998. But only one other system has returned over 1,380%. That is the CANSLIM system which has returned 1,477% since 1998 compared to the SP 500's 42% return. Also the IBD 100 from 5/2/2003 to 4/3/2008 has returned 206.6% compared to the SP 500's 47.2%.
Oh yes! Did you notice that if you invested in the SP 500 in 1998 you have made LESS money than if you would have invested in the SP 500 the day the IBD 100 was created!!!!!! Yeah, tell me again how it is stupid to buy growth stocks????????????
Let's see, besides CANSLIM, there are two other strategies which are both up over 2,000% since 1998. What are they?
--O'Shaughnessy Tiny Titans tries to predict the future using historical long-term trends. These screens combine both value and growth criteria to find viable investments: The screens focus on reasonably priced, growing companies whose stock price is rising by including criteria such as relative strength, sales and earnings. (2,463% return since 1998).
--Zweig A strategy that identifies companies with strong growth, a reasonable price-earnings ratio given the company's growth rate, buying by insiders and relatively strong price action. (2,150% return since 1998).
Zweig, O'Shaughnessy, or CANSLIM. I don't care which one you focus on but if you are doing ANYTHING OTHER THAN THESE THREE SYSTEMS, sorry folks, the truth is that your strategy is WEAK, LAME, AND SOMETHING I DON'T GIVE A DARN ABOUT. :) Your system sucks, unless it is one of these three! That is just the facts; ONCE AGAIN, NOT MY OPINIONS.
God I love the stock market and God I love leading stocks! The market is in a short-term uptrend and a lot of HIGH-quality CANSLIM stocks are breaking out. Hopefully, the overall market indexes can join in on this action, WITH HIGHER VOLUME, thus allowing me to start putting my margin to use. If that can happen, I will not hesitate to load up on the prettiest HOT and perfect charts and stocks with fundamentals like GXDX FSLR MCF RIMM SID BUCY PCLN TITN once they set up and breakout from a well formed base.
The stocks with incredible fundamental growth like the ones listed above do NOT have to make picture perfect price, volume, max green BOP charts. DRYS and MTL were both very large positions for me during our last rally and neither one of those had perfect charts by far. However, both had incredible EPS, sales growth and other extremely strong fundamental measures.
DRYS was one of my biggest and best longs with a 106% gain from 8/22/07 to 10/29/07. MTL rallied 92% from 9/27/07 to 12/07/07. Had MTL not broken down below the 50 DMA on very HEAVY distribution in the middle of a bear market I might still be long from that point (I am still long NOW from 2/8 with a 32% gain) with a 156% gain. This is why I need to learn to NEVER sell ALL of my long UNTIL it closes BELOW the 200 DMA, no matter what. I will learn my lesson one day. Hopefully you will learn yours before mine.
We have earnings season coming up and that should be full of fireworks and drama. We will need more volume in the market if we want to keep this rally up. I hope you all are having a great weekend so far, I love you all that have respect for me, and would like to encourage all of you morons reading me that don't like me to please STOP! GET OUT OF HERE and let the winners enjoy the fruits of my spoils. ALOHA and I will see you in the chat room!
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