I have to admit, those that think it is wise to be either a bull or a bear here are doing themselves a major disservice by not studying the past. This market is clearly a range bound market and taking a bullish or bearish side on the overall market is a terrible thing to do.
The correct stance to have is to be bullish in some sectors. Right now, to me, it is clearly obvious that the money is being made in energy stocks or even a couple select medical stocks. The one place you definitely do not want to be right now if you are looking to make money on the long side are the bank stocks which have 80 stocks hitting new 52-week lows. Besides the carnage in the Banks, Insurance, Leisure, Metals, and Real Estate stocks are seeing anywhere from 20 to 30 new lows daily. Now, if you are a bottom fisher trying to get the exact bottom of these stocks then you have suffered some serious damage.
Back in March, I was called names and was viciously attacked by the “buy the banks now” crowd for not buying the banks. Instead I bought stocks that were leading the market at the time as their industry groups were flying to the top of the list. A lot of these stocks included oil stocks and some technology stocks that were finally coming along. But the same old chemicals-fertilizer, steel stocks, and metals , along with the oil stocks kept leading the way up. This was kind of a clear indication that the same old leaders since 2003 were still leading the way higher. This is what prevented me from getting too bullish but at the same time the fact that I was seeing some fresh breakouts combined with old leaders like MTL had me excited that a tradeable rally was on us from March to May. However, now that June has arrived, it is apparant that that was all indeed it was: a short-term tradable rally that did allow CANSLIM investors a short time to make some good money. Stocks like PDO, QTWW, GEOI, XCO, CLR, EBIX, MA, TGC, IPI, NOG, CPST, CSIQ, ROYL, NOG, XIDE, CMP, and MCF all helped make all of my readers plenty of money and helped keep my portfolio up around 20% the past six-months while MANY colleuges of mine had a near impossible task of staying above the water. In fact I know a pretty famous wall street baffoon who has an action alert portfolio down 9.81% YTD. Yet so many still subscribe and listen to this fool that it is shocking.
I know I am not the most politically correct guy in the wall street community but that is what I like about me. I tell you the truth. I tell you like it is and the truth is that this market is pretty crummy. I see a lot of jerks on the WSJ, CNBC, and at TSCM telling peopel that they need to buy this stock on this pullback or to load the boat on this stock that has run up 5000% in three years. This is the kind of advice that leaves people broke. Folks you should never buy a stock that has had more than two splits in a span of three years while running up over 1000%. These splits are caused to get the price of the stock cheap enough so that the dumb public things they are getting a bargain when in fact they are now getting a diluted piece of trash of something that was once very valuable. The first two splits are OK normally. But it is when they make the 3rd split a 3 for 1 deal in the 3rd year of a run that has seen the stock go from a split adjusted 2 to a curent share price of 200. Folks you must stay away from stocks like that.
Also, take a look at HP or ZEUS on a weekly artihmetic chart going back to 2001. You are going to tell me you think those stocks are safe to buy up here ? I don’t think so. Now that we have a lesson on what not to buy in and a lesson on how to recognize stocks that are too far extended due to the arithmetic weekly chart clearly showing you that things have gone too far and too fast. Now that that lesson is done let’s get directly to our current market. You know the piece of junk that we are all trying to learn how to love and live through.
This market, to be honest, is not that difficult if you are only focusing on the top sectors. Those are , of course, the oil&gas stocks that have been doing a great job at making investors money. Especially the exploration and production stocks. Sure there are some in ag, metals, and miners that are doing an OK job with stocks like NCOC but the fact remains that small-cap and mid-cap oil stock are about the only place you want to be if you want to make a lot of money in this market.
However, something in my gut wonders how much longer this can go. I have so many newbies asking me about stocks like PBR and OXY if they are good buys UP HERE. Well, if these subscribers were asking me in2001 to 2003 if they should be buying these stocks I would say go for it. But like I have been saying if your stock is up 5000% in 5 years MOVE ON!
I like to go long stocks that are at least eight years or younger. Those are the stocks that go on to make big gaiin in shor amount of time as their new products start producing huge EPS and sales growth. This is what gets the smart mutual fund managers interested in the stock and has them buying them hand over foot. All of you that are out there wanting to go long oil, corn, and all the other commodities that have been moving since 2000 you need to reevaluate your investment methods. I am sure many of these stocks have much more room to run but the fact that they are way up there compared to where they were when they started tells me looking for shorts is the right play. It isn’t time yet by far but the move in these stocks are near the end and when they top, rollover on huge volume, and break through the 50 and 200 DMA’s there is no doubt stocks like POT, MOS, and a few others will be in my short portfolios
But shorting stocks is a tricky game and too many think just because something looks expensive that it should top. The fact is you need the market to be rolling over on huge volume with some nasty patterns existing out there to short. The sad news, for the bulls, is that a lot of stocks are starting to show those ugly topping patterns. The good news though, for those that love real bull markets, is that most of the topping appears to be in metals, mining, oil, gold, and steel related issues. All of the oil stocks have gone parabolic and all the chemical fert stocks have gone under a nasty churning situation. This should eventually help rotate that ag money into tech money.
This can start to be seen by the nice charts that are showing up on the IBD 85-85 and IBD 100 indexes that are technology and semiconductor related. I have to admit that we were starting to see a bunch of nice charts setup but after the week we just had that was partially destroyed. For the week the Nassy lost a nasty 3.8%, the DJIA swooned 4.2%, and the other indexes faired just as well which was not well at all. But for those of you who are long the strong stocks in the strongest sectors with the prettiest chart there is no way you had a bad week. In fact, coming into this week my portfolios were up only 10% YTD. Now I am leaving the week with an 18% YTD return. Not only that, I am managing one small portfolio that came in the week down almost 2%. It is now leaving this week with a 5% return. Can you say ACM, PDO, XCO, NCOC, TGC, QTWW, and FLIR. This is definitely a stock pickers market and there is no doubt that if you have been going with the trend either up or down you are finally probably doing very well.
To bad most of the jokesters that I read try to tell me about “value” investing all day long. I am not sure why in the heck so many unsuccessful people preach value investing with their personal pathetic records but when I take a look at LEH, GS, ABK, and MBI which were ALL stocks that people YELLED at me to buy and all I can think of is how sick those people that look at PDO and think it is too expensive are. The truth is the majority of the people involved in the stock market have no business here and the fact that half the people on Wall Street can even dress themselves in the AM shocks me. The only thing that doesn’t shock me is the constant lies from the mouths of those on CNBC.
The DJIA is now down 20% from the highs which officially puts it in bear market territory but the entire way lower I was told to buy. The ENTIRE WAY. Why do so many “smart” people tell me to do something that clearly makes you lose a lot of money. Ask those that are still long TASR how buying on the way down worked out?
The truth of it all is that riding the trend higher when stocks are moving higher, riding the trend lower when stocks are moving lower, and staying on the sidelines when stocks are doing nothing is the only way to make the big money. Those that buy stocks on the way down or sell stocks that are moving up and that daytrade very actively when the market is in a trading range will quickly be placed on a hospital gurney as they are whisked away to the “losing money” hospital. The truth is the only way to make the huge money in the stock market is by going extremely long on heavy margin when the market is rallying on HUGE volume and by going very short on huge margin when the market is moving down on HUGE VOLUME. When the market is moving in a choppy fashion like now, you still must not sell out of all of your PDO just because it is up 250% in a month. You can sell out of 50% but by not holding the rest you will possibly watch your perfect looking H-T-F pattern go and run 500% to 1000% without you. You newbies need to stop selling out of all of your biggest winners. You guys are still trading wrong. if you go long a stock and it moves lower immediately, sell 25%. Then watch for my final CUT LOSS level to be hit to get rid of the rest, if the stock does not work out immediately.
As for you newbies who have no clue as to when to sell a stock, make sure that when you have a 20-25% gain that you get rid of 20%, when you have a 50% gain, take another 25% off the table, and then the same thing applies when you get the 100%, 200%, and 500% gains. Make sure you are taking 20-25% off. And don’t give me the excuse I “only have 5 shares.” So what! Sell one, the sell two, then sell two more. At $.005 per share and $1 per 100 shares, trust me, you can afford to partial out. I do not want to hear anymore excuses that you don’t have enough to partial out. One day instead of taking 20% off with a 500% gain, you are going to wake up and instead of taking that 20% off your stock will gap down hard and might let you only walk away with a 300% gain. You want to always be taking profits on the way up and taking big chunks off on big down days. But you never want to just sit back and watch a stock like XCO and PDO make such big moves so fast and not take 10% to 20% off on the way up. You simply must lock in some profits while the market is choppy.
Now, if this market takes off on HUGE volume with stocks rising on volume 20-25% higher than the day before then it is definitely OK to hold your stocks as they race higher. That is how we end up with SINA, SOHU, NTES, SSYS, and USNA from 2002. Our early HOT and pretty green BOP leaders will be our huge winnersl You do NOt want to lose your positions in those. As for stocks like QTWW and MCF, I have to say it is OK to take profits early and to be happy with a 100%, 200%, and even possible 300% winner. The bottom line is with the VIX AT 23 and with the market making it hard to hold onto gains you do want to take your big winners in slowly as they move up. But heck, if this rally started with a 35, 40, or God willing a 50 VIX, trust me I would still have 90% of my PDO and not 50% of it. The 250% gain is locked!! However, if the VIX was at 40, only 20% of that gain would be locked.
The other reason we clearly have to lock our gains in fast is because it is clear the downside is still the trend overall for the market. Even though we seem to be in some great stocks that are treating our portfolios like this is a bull market the fact remains that things are very ugly out there. We have only have 64 new 52-week highs (seems like we are long every one of them :)) to 738 new 52-week lows. So clearly this is not a market to be messed with and that is why despite the fact that you see us at BigWaveTrading.com doing so well overall everyone needs to just be patient with the market. I believe soon the market will be a buy. The press is just too negative.
That was confirmed via the Reuters/University of Michigan sentiment index which fell 3.2 points in June to 56.4. That is the lowest level since 1980 and that comes with current inflation near long-time highs. About the only good news from these fears is that personal savings rates spiked 4.6% to 5% in May which is a good thing for Americans who have an abitlity to spend money on stuff that no one needs. It is nice too see this saving rate go up. Maybe instead of buying another worthless non-durable good, some of the illiinformed invesotrs can start to leearn to take control of their financial future so someone like me who will have MS and have to pay for it out of my own pockets will not also have to take care of other people as they destroy their future by not investing
I want to wrap it up here by reminding everyone that we should not get as negative at the TV is. The bears on the Investors Intelligence is at 39% while the bulls are only at 33%. When I see the pros so negative, see the put/call stay over the 1.00 level for so long (like it is now at 1.01), and read nothing but bearish headlines about the market I know that I need to be looking for a rally and not a selloff. Therefore the longs, the max green BOP, the big tall green volume bars, and all the open daily pretty price candlestick bars are where my focus is going to remain. If you have not been studying my PAST BIG WINNERS, PLEASE!!!!!!! TAKE THE TIME TO STUDY EVERY SINGLE ONE FROM 1999 TO APPY IN 2007. That way when the next near-perfect to perfect chart comes around with the market making 2-3% plus gains on volume 25% higher than the day before YOU WILL BE READY TO MAKE A TON!! OF MONEY. Trust me, this bear market will not last forever. Another bull market will come shortly. Be patient, keep that cash high for those perfect stocks, protect that capital, and make sure you keep those green BOP and CANSLIM watchlist updated to that when the next real bull market with a lot of stocks rallying higher with CANSLIM quality eps and sales growth with max green BOP charts come along, breakout, and run producing us the kind of gains that we can think about retiring on.
Monday, June 30, 2008
Sunday, June 22, 2008
DJIA, SP-500, NYSE, and Nasdaq Breakdown On Very Strong Volume; The SP-600 (SmallCap Index) Is Starting To Show Strong Relative Strength To The Market
Well there is absolutely nothing else that can describe Friday other than pure utter disappointment. I am telling you right now that the odds of us starting another leg lower has increased by leaps and bounds after Friday’s breakdown. Why? Because something that happened this time last happened in 2000. After an initial breakdown, some stocks recovered and some created very bullish chart patterns. After initially working, they soon all reversed as around August 2000 the stock market then resumed its trend lower. There is nothing that says that we are going to have a bear market like we did in 2000. However, the 10 new shorts that I have for Monday have the EXACT SAME PATTERNS that I saw in August to September of 2000.
What is that pattern? After years-and-years-and-years of price gains (most stocks now are from 2002-2008–six year uptrends) the stocks started to chop around creating a churning area that many amateurs mistake as bases. What these amateurs failed to notice was that those bases were created on HUGE volume, unlike anything that had occurred before that time frame. If you are a subscriber go take a look at those long term charts that I posted. I post those charts to show you the whole previous uptrend, show you the rolling over churning action on much heavier volume, and then you can go and look at your own charts at home and see the breakdown with my detailed analysis. These charts sure do look like the same charts in technology stocks with no earnings back in 2000. There is no difference in chart patterns. Only the stock names are different. The really scary part, this time, is that it is not money losing internet companies…it is money losing banks. This is sort of scary.
However, fear is just what a market needs to bottom. Is my fear of a bear market the perfect contrarian signal? I hope so! Trust me, going long my beautiful green charts and making a lot of money in stocks like QTWW or PDO on their most recent uptrends is much better than going short stocks from November to January and making 50% on CBEY SIGM and a few others. The most you can make on a short is 99.9% and the most you can make in a long so far is 80,000% (CSCO). I like my odds with the longs. Especially, considering you can find no money losing 20-year period in the stock market since 1880. Being long is what I like to do. However, if the market is moving lower and offering me up charts like it did on Friday, I must start to focus on the long side.
That is especially the case given that volume exploded higher on this huge breakdown day. Everyone will say volume is quadruple witching and that the selling isn’t real. But these are the same people that were just telling me a couple of months ago that the high volume on the quadruple witching that led to the FTD was real. Whatever. It is what it is: a much higher volume selloff. Not bullish at all.
The only bullish bit of information to come out of the market the past week is in fact on the sentiment side. But these sentiment indicators are not buy and sell signals. They are simply sentiment indicators! They help us judge the crowd and by knowing where the crowd is along with our chart knowledge we can see if “all the stars are lined up.” Right now by my definition of “all the stars lined up” we are not there at the proper moment to buy stocks. You can not buy stocks when the indexes are breaking down right after a few perfect charts setup, started to work, and then miserably failed. However, those small failures are nothing like the failures of the banks. While I may get a lot of 3% to 10% losses at least I will never hold a loss that I can not come back from. If I lose 7% on a stock, I only have to make 7 to 8% back to break even. But if I lose 50%, I need a 100% gain on my next purchase to break even. That is why I do not like buying stocks on the way down. How do you know when you are wrong?
You know how I know when I am wrong? The stock does not move in the direction I intended it. The greatest traders buy a stock and that stock either moves up a lot immediately or they sell it. They don’t mess around. If they buy a stock and the next day it shows a loss they will sell it immediately. They only hold green stocks on their books. I have learned that the best cut their losses the fastest. Therefore, I don’t mess around. Either my stock moves higher immediately or I sell it. I should probably be more tight but I like to give my stocks just a little bit more extra wiggle room in a market that is very volatile like the current intraday market we see daily. I recommend that newbies NEVER let a loss EVER go over 10%. No matter what sell all your long or short if you lose 10% or 5% respectively. Do not settle for any losses on your books.
On that same note, in this very choppy market where very few stocks run, I strongly urge ALL NEWBIES WHO DO NOT KNOW HOW TO SPOT TOPPING SIGNALS OR PROFIT TAKING SIGNALS TO DO THIS: If you have a 20%-25% gain, sell 20-25% of your holdings. Once you get a 50% gain, do the same thing. And when you have a 100%, 200%, 300%, etc…, do it again. This is only if you do NOT know what to look for when a stock is topping on the short term, sub-intermediate term, intermediate term, and long term.
Now, getting back to the market. Stocks plunged on Friday thanks to a reminder of how bad it is out there with the credit and rising oil prices. This bit of worry rippled through the market as quietly as a tsunami destroys all life in mere minutes of pure disaster and tragedy. Today was a tragedy for many, I am sure. I have to admit, however, that I (plus many many members of my chat room) did not suffer a lot of damage today to my portfolio, despite my biggest holding falling 2.6%. What hurt more was the damage the market did to my psyche. I was starting to see a lot of very pretty charts, and even though recently some were rattled, I still had that “hope” that the rally could go from base building to a breakout stage where the Nasdaq could run AT LEAST 20%. Sadly Friday killed that hopeful dream and replaced with a possible nightmare scenario. Why nightmare? Because there are some FUGLY weekly chart patterns in bank stocks.
I don’t know how well the market is going to do with banks selling off. About the only hope I can find in this story is that these banks have real money and unless the USA goes broke there is no way these banks are worthless assets. The good news is that buyers will come in EVENTUALLY (but that means could be tomorrow or could mean years :() and buy these stocks as they find real value in them. However, trying to GUESS the bottom which is all it is is a horrible and historically inferior methodology for buying stocks. Buying stocks in a downtrend is how you end up waking up one morning and see that your account is down 25% overnight. The trend is your friend; there is NEVER a reason to fight it.
For the week, the DJIA fell 3.8%, the SP 500 fell 3.1%, the NYSE fell 2.6%, the Nasdaq fell 2%, but the IBD 100 rose .4%. The IBD 100 matches my account for being up on the week. Except this week I dominated the overall market with a weekly 5% gain. Thank you PDO! This goes to show, once again, of the power of being long leading stocks with great fundamentals in leading industry groups. I went long some BEAUTIFUL chart patterns in stocks with great fundamentals. The stocks that came from strong industry groups did well and the longs from the weak industry groups did the worse. However, despite my gains, the fact that the Nassy has seen losses in above average volume the past four out of five weeks is enough to keep me away from buying stocks in bulk any time soon.
Volume on Friday was 8% higher on the Nassy and 36% higher on the NYSE, compared to the day before. This is clear distribution, even though it was quadruple witching. If it was not distribution, we would have seen a FLAT day with volume 36% higher. Instead we saw the DJIA, SP 500, the NYSE, and Nasdaq all breakdown. The NYSE, DJ, and 500 all undercut their recent lows while the Nasdaq remains, I believe, only 6 points away. Clearly there is no support here at all and it is now a very bleak technical picture on the major indexes.
Why did the market take a hit today, when so many big-cap stocks were selling off leading up to Friday? Well, despite the big-caps being sold, small caps were doing pretty well, riding the 50 day moving average higher the entire way. Even on Friday there was a huge intraday reversal showing clear support for this small cap index. The SP 600’s relative strength line is hitting a BRAND NEW 52-week high, despite the small cap index being 13% away from its old 52-week high. This is extreme relative strength, in the middle of all of this selling is very bullish for this index and for a market rally–IF WE RALLY. However, if the SP 600 with that strong relative strength and the Nasdaq breakdown, you can be sure we will probably fall I would ASSUME (this is an OPINION not a fact. It is simply an opinion based on history and the current technicals in the indexes) at least 20% from here to the lows. Like I just said, there is not a lot of real solid support on the indexes.
We broke down this week because leading stocks finally took on the selling pressure that the rest of the market was seeing in the banks and railroads. During the positive weeks we had plenty of leading stocks rally. That is why I had so many do so well during a choppy and rough past six months. However, all those stocks that were setting up are now showing signs of injury and this could lead, like I said, to the market giving up the hard fought gains we just received.
Stocks like SOHU, SINA, NTES, OMI, CETV, IEX, DV, LNN, QCOM, CTSH, OI, FDS, SQM, GLF, ROC, and SID are all leading CANSLIM stocks that felt some sort of pressure on Friday. Until this week, most of these stocks were looking good to great. Not anymore. I am raising my cash levels, protecting my capital, and playing defense as this will be the proper way to play this choppy market as it turns into a bear market THAT I WILL SHORT for more 2008 profits. This is a nice want, I hope I can deliver. It is up to the market if it wants to reward me or not. I will not force anything.
While I will not force anything I do have to stress that if this market turns lower and I continue to get heavy volume distribution days, I will be more-than-willing to go hunting for more shorts to add to my current holdings which are still not much of any position in my portfolio (maybe 4% right now). But if we start selling off I can get to 100% short VERY quickly. I just need the market to cooperate and move lower on strong volume. Higher volume but a directionless market does not help me long or short. I do not like swing trading support and resistance and I do not like daytrading futures currently. Therefore, I will keep all my new longs and shorts small. The only way I would go heavy right now, in this market is if the long setup was perfect with max green BOP, nothing but strong accumulation with no distribution for the past six months, and a perfect nice and calm uptrend followed by a cup with handle or any other correct basing pattern identified by Investors Business Daily.
I probably will not have to worry about that since the slow selling in the broad market has now rolled into the leading groups of the stock market. Charts that were once beautiful gems are now mediocre at best. DGLY was the perfect example of this. After April 16th and April 17th I was pretty excited that I probably was going long a monster stock. The chart was perfect with max green BOP, huge accumulation, and a perfect price pattern with the price bouncing right off the 50 DMA on very strong volume.
Too bad, a big boy decided that DGLY was not going to become the next monster. On May 14th the daily chart of DGLY could not have been more perfect. It was one of the nicest charts that I have seen in months and yet what happened? It failed…sort of. I am still long DGLY and have around a 20% on the remaining shares that I am holding. Plus I did sell 20% around the 50% gain area as per my rule of taking profits on the way up in this market. Still this chart on 5/14 should never have been followed by 5/21’s move. That move killed a perfect chart and led to even more selling that has made the stock only an OK stock so far.
Other great chart patterns hurt this year include BRKR, BKE, and AEHR. These were all near-perfect to perfect when I went long and now I have sold out of two completely and have sold out of 50% of the other one. The bottom line is that this market is not a market for hot stock charts right now. This is yet another reason to keep long small and to ONLY focus on the energy, metals, and other sectors moving into the top 20 of 197 industry groups. Today you only have about 10 groups up out of 197 so it should be pretty easy to find the leading stocks in a down market like today. The only problem is the lack of leadership overall which might make it hard for bulls to make money as everyone sees the same thing and thus it doesn’t work.
A lot of people are telling me this weekend that they think Friday will be the only down day because the put/call jumped to a very fearful level of 1.25 which is the highest since March when it jumps to over 1.00 it is a sign that the “dumb money” is very fearful and that stocks will rally because the dumb money is buying puts expecting lower prices and the stock market punishes those that think like this. Another area of sentiment that has traders talking of a bottom is the investors intelligence survey which this week showed bulls at 36% and bears at 37%. When the bears exceed bulls it is a sign that market professional themselves are too bearish and that stocks will be rising shortly. My only problem with this is that people put too much faith in it. Besides seeing these contrarian signals flash buy signs, I must see how the market is acting and how leading stocks are acting. If you did not see the market on Friday then you missed out on some ugly action. Maybe the bears will have to hit 50% and the bulls will have to hit 20% before a real bottom can be made.
And speaking of bottoms. Whatever you do, do not get involved with the SAD AND PATHETIC game of bottom calling. Let the professional amateurs that told us to buy banks in March go after the next bottom that they will miss over and over and lose money over and over. Do not get involved in this losing method of bottom calling. I just simply can not stress this enough! Remember, 3 out of 4 stocks fall in a bear market. You should not try to find the 1 out of 4 if this market rolls over. Let me give it a try, but it has been choppy and unless the longs that I pick are in the top 20% of industry groups based on six month price performance it probalby will not do well at all. We will definitely need a strong industry group if we want to get long. Not a bottom bouncer. Don’t play with falling knifes. How many people do you think are just now selling ABK and MBI after a morning Moody’s downgrade. I am sure there are some holding a 90% plus loss ON BOTH STOCKS. However, there are also some with 90% plus short gains also. This is why I do not buy falling knifes right there. Instead by following the trend you profited on the breakdown and swoon.
There is not a whole lot more that I can add besides some more technical information. The VIX is only at 22.97 which indicates that despite the investors intelligence survey and put/call ratio, those that are buying stocks are very complacent and bullish about their current holdings. It is going to take a big swoon to get this VIX up to the 35 to 50 level that I like it. Also, it is hard to put a bottom in when you have 415 new 52-week lows to only 68 new 52-week highs. That simply is not what you see in a market ready to run. We would be more near breakeven or the new highs would be beating the new lows.
The accumulation/distribution ratings on the indexes are getting ugly to with the NYSE sporting a lowest of the low E, the SP 500 has a D-, the Nasdaq sports a C, and the IBD 85-85 has a C+ to lead the pack. I tell you what, when a C+ is your top index you can be sure it is going to be a rough go of things for a little while. About the only place that might be safe is the energy arena. Metals, select medical, finance, and some utilities might make good longs in this environment while banks, retail, media, and big drugs all do very poorly in this current market environment.
For those that think the market has to selloff to get cheap again I ask you this where do you want the DJIA p/e ratio to be at? Right now it is at a staggering 97! That seems quite high to me but I know I have seen some high readings before. But the 52-week high is a p/e of 102. That is also a five year high. SHEESH, this market IS expensive!! Maybe we really do need to selloff to a “cheap” area so that we can get a massive long position going. This time hopefully, err…the next time we get long all of these beautiful chart patterns in stocks like BKE, BRKR, AEHR, and DGLY, I promise you, if we are in a new bull market, will produce powerful monster stock returns.
I am dead tired and believe I have given you enough to chew on this weekend. Remember, raise cash, protect your capital, keep new positions small until a downtrend or uptrend is officially clearly back in vogue. Defense is the name of the game, right now. Aloha and I will see you in my chat room where the ChatBlazer monster can’t stop eating me.
What is that pattern? After years-and-years-and-years of price gains (most stocks now are from 2002-2008–six year uptrends) the stocks started to chop around creating a churning area that many amateurs mistake as bases. What these amateurs failed to notice was that those bases were created on HUGE volume, unlike anything that had occurred before that time frame. If you are a subscriber go take a look at those long term charts that I posted. I post those charts to show you the whole previous uptrend, show you the rolling over churning action on much heavier volume, and then you can go and look at your own charts at home and see the breakdown with my detailed analysis. These charts sure do look like the same charts in technology stocks with no earnings back in 2000. There is no difference in chart patterns. Only the stock names are different. The really scary part, this time, is that it is not money losing internet companies…it is money losing banks. This is sort of scary.
However, fear is just what a market needs to bottom. Is my fear of a bear market the perfect contrarian signal? I hope so! Trust me, going long my beautiful green charts and making a lot of money in stocks like QTWW or PDO on their most recent uptrends is much better than going short stocks from November to January and making 50% on CBEY SIGM and a few others. The most you can make on a short is 99.9% and the most you can make in a long so far is 80,000% (CSCO). I like my odds with the longs. Especially, considering you can find no money losing 20-year period in the stock market since 1880. Being long is what I like to do. However, if the market is moving lower and offering me up charts like it did on Friday, I must start to focus on the long side.
That is especially the case given that volume exploded higher on this huge breakdown day. Everyone will say volume is quadruple witching and that the selling isn’t real. But these are the same people that were just telling me a couple of months ago that the high volume on the quadruple witching that led to the FTD was real. Whatever. It is what it is: a much higher volume selloff. Not bullish at all.
The only bullish bit of information to come out of the market the past week is in fact on the sentiment side. But these sentiment indicators are not buy and sell signals. They are simply sentiment indicators! They help us judge the crowd and by knowing where the crowd is along with our chart knowledge we can see if “all the stars are lined up.” Right now by my definition of “all the stars lined up” we are not there at the proper moment to buy stocks. You can not buy stocks when the indexes are breaking down right after a few perfect charts setup, started to work, and then miserably failed. However, those small failures are nothing like the failures of the banks. While I may get a lot of 3% to 10% losses at least I will never hold a loss that I can not come back from. If I lose 7% on a stock, I only have to make 7 to 8% back to break even. But if I lose 50%, I need a 100% gain on my next purchase to break even. That is why I do not like buying stocks on the way down. How do you know when you are wrong?
You know how I know when I am wrong? The stock does not move in the direction I intended it. The greatest traders buy a stock and that stock either moves up a lot immediately or they sell it. They don’t mess around. If they buy a stock and the next day it shows a loss they will sell it immediately. They only hold green stocks on their books. I have learned that the best cut their losses the fastest. Therefore, I don’t mess around. Either my stock moves higher immediately or I sell it. I should probably be more tight but I like to give my stocks just a little bit more extra wiggle room in a market that is very volatile like the current intraday market we see daily. I recommend that newbies NEVER let a loss EVER go over 10%. No matter what sell all your long or short if you lose 10% or 5% respectively. Do not settle for any losses on your books.
On that same note, in this very choppy market where very few stocks run, I strongly urge ALL NEWBIES WHO DO NOT KNOW HOW TO SPOT TOPPING SIGNALS OR PROFIT TAKING SIGNALS TO DO THIS: If you have a 20%-25% gain, sell 20-25% of your holdings. Once you get a 50% gain, do the same thing. And when you have a 100%, 200%, 300%, etc…, do it again. This is only if you do NOT know what to look for when a stock is topping on the short term, sub-intermediate term, intermediate term, and long term.
Now, getting back to the market. Stocks plunged on Friday thanks to a reminder of how bad it is out there with the credit and rising oil prices. This bit of worry rippled through the market as quietly as a tsunami destroys all life in mere minutes of pure disaster and tragedy. Today was a tragedy for many, I am sure. I have to admit, however, that I (plus many many members of my chat room) did not suffer a lot of damage today to my portfolio, despite my biggest holding falling 2.6%. What hurt more was the damage the market did to my psyche. I was starting to see a lot of very pretty charts, and even though recently some were rattled, I still had that “hope” that the rally could go from base building to a breakout stage where the Nasdaq could run AT LEAST 20%. Sadly Friday killed that hopeful dream and replaced with a possible nightmare scenario. Why nightmare? Because there are some FUGLY weekly chart patterns in bank stocks.
I don’t know how well the market is going to do with banks selling off. About the only hope I can find in this story is that these banks have real money and unless the USA goes broke there is no way these banks are worthless assets. The good news is that buyers will come in EVENTUALLY (but that means could be tomorrow or could mean years :() and buy these stocks as they find real value in them. However, trying to GUESS the bottom which is all it is is a horrible and historically inferior methodology for buying stocks. Buying stocks in a downtrend is how you end up waking up one morning and see that your account is down 25% overnight. The trend is your friend; there is NEVER a reason to fight it.
For the week, the DJIA fell 3.8%, the SP 500 fell 3.1%, the NYSE fell 2.6%, the Nasdaq fell 2%, but the IBD 100 rose .4%. The IBD 100 matches my account for being up on the week. Except this week I dominated the overall market with a weekly 5% gain. Thank you PDO! This goes to show, once again, of the power of being long leading stocks with great fundamentals in leading industry groups. I went long some BEAUTIFUL chart patterns in stocks with great fundamentals. The stocks that came from strong industry groups did well and the longs from the weak industry groups did the worse. However, despite my gains, the fact that the Nassy has seen losses in above average volume the past four out of five weeks is enough to keep me away from buying stocks in bulk any time soon.
Volume on Friday was 8% higher on the Nassy and 36% higher on the NYSE, compared to the day before. This is clear distribution, even though it was quadruple witching. If it was not distribution, we would have seen a FLAT day with volume 36% higher. Instead we saw the DJIA, SP 500, the NYSE, and Nasdaq all breakdown. The NYSE, DJ, and 500 all undercut their recent lows while the Nasdaq remains, I believe, only 6 points away. Clearly there is no support here at all and it is now a very bleak technical picture on the major indexes.
Why did the market take a hit today, when so many big-cap stocks were selling off leading up to Friday? Well, despite the big-caps being sold, small caps were doing pretty well, riding the 50 day moving average higher the entire way. Even on Friday there was a huge intraday reversal showing clear support for this small cap index. The SP 600’s relative strength line is hitting a BRAND NEW 52-week high, despite the small cap index being 13% away from its old 52-week high. This is extreme relative strength, in the middle of all of this selling is very bullish for this index and for a market rally–IF WE RALLY. However, if the SP 600 with that strong relative strength and the Nasdaq breakdown, you can be sure we will probably fall I would ASSUME (this is an OPINION not a fact. It is simply an opinion based on history and the current technicals in the indexes) at least 20% from here to the lows. Like I just said, there is not a lot of real solid support on the indexes.
We broke down this week because leading stocks finally took on the selling pressure that the rest of the market was seeing in the banks and railroads. During the positive weeks we had plenty of leading stocks rally. That is why I had so many do so well during a choppy and rough past six months. However, all those stocks that were setting up are now showing signs of injury and this could lead, like I said, to the market giving up the hard fought gains we just received.
Stocks like SOHU, SINA, NTES, OMI, CETV, IEX, DV, LNN, QCOM, CTSH, OI, FDS, SQM, GLF, ROC, and SID are all leading CANSLIM stocks that felt some sort of pressure on Friday. Until this week, most of these stocks were looking good to great. Not anymore. I am raising my cash levels, protecting my capital, and playing defense as this will be the proper way to play this choppy market as it turns into a bear market THAT I WILL SHORT for more 2008 profits. This is a nice want, I hope I can deliver. It is up to the market if it wants to reward me or not. I will not force anything.
While I will not force anything I do have to stress that if this market turns lower and I continue to get heavy volume distribution days, I will be more-than-willing to go hunting for more shorts to add to my current holdings which are still not much of any position in my portfolio (maybe 4% right now). But if we start selling off I can get to 100% short VERY quickly. I just need the market to cooperate and move lower on strong volume. Higher volume but a directionless market does not help me long or short. I do not like swing trading support and resistance and I do not like daytrading futures currently. Therefore, I will keep all my new longs and shorts small. The only way I would go heavy right now, in this market is if the long setup was perfect with max green BOP, nothing but strong accumulation with no distribution for the past six months, and a perfect nice and calm uptrend followed by a cup with handle or any other correct basing pattern identified by Investors Business Daily.
I probably will not have to worry about that since the slow selling in the broad market has now rolled into the leading groups of the stock market. Charts that were once beautiful gems are now mediocre at best. DGLY was the perfect example of this. After April 16th and April 17th I was pretty excited that I probably was going long a monster stock. The chart was perfect with max green BOP, huge accumulation, and a perfect price pattern with the price bouncing right off the 50 DMA on very strong volume.
Too bad, a big boy decided that DGLY was not going to become the next monster. On May 14th the daily chart of DGLY could not have been more perfect. It was one of the nicest charts that I have seen in months and yet what happened? It failed…sort of. I am still long DGLY and have around a 20% on the remaining shares that I am holding. Plus I did sell 20% around the 50% gain area as per my rule of taking profits on the way up in this market. Still this chart on 5/14 should never have been followed by 5/21’s move. That move killed a perfect chart and led to even more selling that has made the stock only an OK stock so far.
Other great chart patterns hurt this year include BRKR, BKE, and AEHR. These were all near-perfect to perfect when I went long and now I have sold out of two completely and have sold out of 50% of the other one. The bottom line is that this market is not a market for hot stock charts right now. This is yet another reason to keep long small and to ONLY focus on the energy, metals, and other sectors moving into the top 20 of 197 industry groups. Today you only have about 10 groups up out of 197 so it should be pretty easy to find the leading stocks in a down market like today. The only problem is the lack of leadership overall which might make it hard for bulls to make money as everyone sees the same thing and thus it doesn’t work.
A lot of people are telling me this weekend that they think Friday will be the only down day because the put/call jumped to a very fearful level of 1.25 which is the highest since March when it jumps to over 1.00 it is a sign that the “dumb money” is very fearful and that stocks will rally because the dumb money is buying puts expecting lower prices and the stock market punishes those that think like this. Another area of sentiment that has traders talking of a bottom is the investors intelligence survey which this week showed bulls at 36% and bears at 37%. When the bears exceed bulls it is a sign that market professional themselves are too bearish and that stocks will be rising shortly. My only problem with this is that people put too much faith in it. Besides seeing these contrarian signals flash buy signs, I must see how the market is acting and how leading stocks are acting. If you did not see the market on Friday then you missed out on some ugly action. Maybe the bears will have to hit 50% and the bulls will have to hit 20% before a real bottom can be made.
And speaking of bottoms. Whatever you do, do not get involved with the SAD AND PATHETIC game of bottom calling. Let the professional amateurs that told us to buy banks in March go after the next bottom that they will miss over and over and lose money over and over. Do not get involved in this losing method of bottom calling. I just simply can not stress this enough! Remember, 3 out of 4 stocks fall in a bear market. You should not try to find the 1 out of 4 if this market rolls over. Let me give it a try, but it has been choppy and unless the longs that I pick are in the top 20% of industry groups based on six month price performance it probalby will not do well at all. We will definitely need a strong industry group if we want to get long. Not a bottom bouncer. Don’t play with falling knifes. How many people do you think are just now selling ABK and MBI after a morning Moody’s downgrade. I am sure there are some holding a 90% plus loss ON BOTH STOCKS. However, there are also some with 90% plus short gains also. This is why I do not buy falling knifes right there. Instead by following the trend you profited on the breakdown and swoon.
There is not a whole lot more that I can add besides some more technical information. The VIX is only at 22.97 which indicates that despite the investors intelligence survey and put/call ratio, those that are buying stocks are very complacent and bullish about their current holdings. It is going to take a big swoon to get this VIX up to the 35 to 50 level that I like it. Also, it is hard to put a bottom in when you have 415 new 52-week lows to only 68 new 52-week highs. That simply is not what you see in a market ready to run. We would be more near breakeven or the new highs would be beating the new lows.
The accumulation/distribution ratings on the indexes are getting ugly to with the NYSE sporting a lowest of the low E, the SP 500 has a D-, the Nasdaq sports a C, and the IBD 85-85 has a C+ to lead the pack. I tell you what, when a C+ is your top index you can be sure it is going to be a rough go of things for a little while. About the only place that might be safe is the energy arena. Metals, select medical, finance, and some utilities might make good longs in this environment while banks, retail, media, and big drugs all do very poorly in this current market environment.
For those that think the market has to selloff to get cheap again I ask you this where do you want the DJIA p/e ratio to be at? Right now it is at a staggering 97! That seems quite high to me but I know I have seen some high readings before. But the 52-week high is a p/e of 102. That is also a five year high. SHEESH, this market IS expensive!! Maybe we really do need to selloff to a “cheap” area so that we can get a massive long position going. This time hopefully, err…the next time we get long all of these beautiful chart patterns in stocks like BKE, BRKR, AEHR, and DGLY, I promise you, if we are in a new bull market, will produce powerful monster stock returns.
I am dead tired and believe I have given you enough to chew on this weekend. Remember, raise cash, protect your capital, keep new positions small until a downtrend or uptrend is officially clearly back in vogue. Defense is the name of the game, right now. Aloha and I will see you in my chat room where the ChatBlazer monster can’t stop eating me.
Sunday, June 15, 2008
Amazing How This Market Changes Like It Does. Now I Have Nice Charts Literally EVERYWHERE!
These charts that are setup in extremely bullish patterns right now, however, will probably be destroyed on Monday. However, just the thought of me thinking this might be the bearishness needed to make this rally attempt work. The bottom line today was that my scans "went off" with a ton of stocks giving long signals. Not only that but there are now so many stocks in my watch list that if this market starts moving, I am 100% sure I am going to have no problem making a lot of money.
Even if it doesn't work out I am already back to almost a 10% gain after the great day in a few stocks I am heavily invested in for the YTD. If a rally would occur now I think I would have no problem beating most of my investing "partners" in the current market. I see a lot of bearishness on bullish stocks and bullishness on ugly bank stocks. That is just what I like to see by the general public. That along with the high NYSE short-interest ratio and no one believing that stocks can rally because Cramer says the market is oversold and an index is giving him a buy signal. This time, for a change, Cramer will be right. Unlike his Action Alert Portfolio which is down 8% YTD; almost an 18% difference in performance YTD. Maybe that is why he has to promote all those books and give away his service for a 50% discount. I can personally tell you right now that he WAS ONCE a GREAT trader. But now he is an also-ran and I hate to admit it but a site I once loved and had the GREAT opportunity to work for, for four months, is now a pile of crap.
The junk that I read on that site today was equivalent to a pile of trash in my backyard. It was simply disturbing for someone that has mastered the CANSLIM system, like me and so many others, to be forced to read the N O I S E that comes from that place. I work for some great sites and every once in a while some great material is out there but overall 80% of it is horrible advice.
Like the recommendation to go long PAL and SWC. I have NEVER heard anyone "so sure" of themselves as this particular writer was but man o man those are charts I would not even allow .01% of my assets to go into. When you have stocks out there like NCOC, ICO, QTWW, MA, CPST, and XIDE, why would you waste your time in stocks losing money? I can give you 5 stocks that start with the letter A that are setup for potential huge gains, IF THE MARKET CAN GET ITS ACT TOGETHER, that is.
I don't care how great a stock is as long as this market wants to do the exact opposite of a previous big day, then we will never make clear easy progress. However, like I continue to tell you, if you are long oil, energy, coal, solar, manufacturing, metals, or mining stocks, you can find a TON of stocks that are great longs. I can give you over 100 great longs right now in a market that is giving such "great professionals" as Cramer an 8% loss.
Not only does Cramer have an 8% loss, but the Stocks-Under-$10 service for TSCM is up a walloping NEGATIVE-14% for 2008. -8% and -14% for PREMIUM service is not too bad. YEAH RIGHT! ICO is up 75% in two months and MA is up 500% in two years. So I guess you really actually have to be more than a mouthpiece to make money in a market that is not in the 1980s and 1990s. This is not your Ronald Reagan and 2nd-term tax cutting Clinton economies right now.
I guess we can tell how good the quality is by the stock price. When I look at TSCM and compare it to some of my oil longs the past few months I see that we have a stock that is not doing well at all in this market. In fact that is an extremely ugly chart. As you can see right after I left, the stock fell apart. ;) All kidding aside, a stock under $10 in a nasty downtrend doing worse than the market is not good. I bet $5 is not far off. I now contribute to Seeking Alpha, Straight Stocks, and iStockAnalyst as they are free and open sites and I prefer to have my body of work put out to the public in my own creative way. I did not write any columns about any stocks the past week, but if you take the time to go to Seeking Alpha and read about all of the stocks that I have profiled up until now (should be about 5-7 so far) you can see that the stocks profiled are doing very well. I would keep an eye out for another 5 stocks that have very nice chart patterns that I want to bring to the attention of readers as possible long-term gems.
There are also other sites I read like Minyanville, Marketwatch, Sharkinvesting, HardRightEdge, and Investors Business Daily. The quality on those site I have found are of higher quality than what is on TSCM. So there are other choices out there, for some of you who have asked me recently where else they can go to get great research. The sad fact is since Gary B. Smith stopped writing for TSCM and RevShark stopped giving small and mid-cap stock picks on Realmoney.com, the site has gone down the tube. now reading SA, MV, MW, SI, HRE, IBD, SS, and iSA are much more enjoyable. However, do not dismiss Alan Farley, Dan Fitzpartrik, Helene Meisler, John Hughes and Scott Maragioglio, Mark Manning, Chris Schumacker, Harry Schiller, or Garry Morrow. They are all great technicians that do a great job on giving good TA coverage. However, sharkinvesting and hardrightedge cover it well also. Not only that but not many talk about Michael Ashbaugh who has a marketwatch.com column for only $300 a year. That along with Jeff Cooper at Minyanville.com make for great side-research to this site.
Other greats to read would be Dan Zanger, old TokyoJoe stuff (no longer available), and EVERY SINGLE BOOK I listed on my website. There is more than enough good information out there, besides the now failing TSCM. What a piece of crap that company has become. Maybe later on if they get rid of David Sterman and bring me back (yeah right, they prefer failures who "tow-the-line" NOW) someone like Kristin they can TRY to get back to that old site I once loved. A lot of recent readers have been asking for more SA articles and I promise I will get them up. This is just my good-will attempt at trying to promote other sites that I read daily and/or have respect for. I also think Brad Koteshwar who wrote two great stock market books has a site. I would like to check that out too. However, I am pretty sure none of them had ICO the past two months or MA the past two years. But heck maybe they had POT, CF, TNH, or SQM for the past five. I would LOVE to see that.
Ken Heebner WAS my favorite mutual fund manager and I DEFINITELY LISTEN TO EVERYTHING he says about the MACRO ECONOMY NOW. However, for those that rush out to buy what he recommends, I want you to remember that he is now a KNOWN MUTUAL FUND manager. When NO ONE knew him, but me and a few other hardcore growth addicts, he had under $500 million in assets. Now the guy has billions. He used to close it ALL THE TIME. Now it is always opened. The old Heebner way of buying stocks is not as easy. It still can be done. But like I was telling someone a month ago, when PBR was 75, to wait for it to pullback to the 50 DMA as Heebner is probably now using CNBC to sell. That person listened and has been rewarded as PBR pulled back right to the 50 DMA at 65 and bounced. I recently saw him recommend POT. PLEASE DO NOT CHASE POT. Will it still run. PROBABLY. But no way in the world can you look at an arithmetic weekly going back to 2002 and tell me that this stock is a "safe" growth stock to LOAD UP on. I know when it is too late. There is still probably another big run left. But the 2000% gains are over.
I am going to be away on the other side of the island all day Saturday so will not get a chance to update the rest of the commentary until Sunday but what I have written so far is a start and now you know where to go to read quality research whenever you are done reading what I post on my site. I am not bein cocky, I am not being an ass, I am being SINCERE. I have looked for a site like mine for 12 years. It took ME!!! to create it as I was looking for a mix of a speculative/momentum/CANSLIM site that produced some huge returns in bull markets and a few other times in super-bullish sectors when the market was bad. Not only that I wanted someone that was good at shorting.
GBS worked for a while, then he left. RevSharks picks were too short term and he was missing the HUGE BULK of the moves. Zanger did not "get involved" enough for me...and so now we have this site. And for those that are current subscribers that have followed my recently longs you know how well the "top performers" have been. The stocks that I have alerted to you as "must buys" have done very well. A few have had VERY BUMPY rides but their trends remain up and they are still making money. There are a few I really like right now that have done very well and I would hope they do AT LEAST another 100% well.
I will be back on Sunday to add some more thoughts (but you should know I am only 50% on following-through with that), HOPEFULLY. If not, then enjoy your weekend and have a great time with your family!!! After hearing of Tim Russerts death, I was pretty sad. 58 years old, only 58. Yet, it appears, to his son, he was invincible. I can only hope I am that kind of dad in the future. Republican or Democrat, Conservative or Liberal, it should NEVER matter when someone who was this kind dies. He was a great man and even though socially and economically I lean VERY Conservative, I must admit "Meet the Press" was a FANTASTIC show to watch on Sunday, when it wasn't football season. He will be greatly missed and must admit I feel deep remorse and sadness from his death.
Subscribers to my website will notice there are a LOT of longs. I will go into full detail on these and which ones are buyable and which ones need to be just observed. There are some real gems in there so make sure before the opening bell on Monday you make it back to check those out. Also for those without a subscription (what are you thinking!!!! SERIOUSLY!!! F the price! Do you know what kind of gains you are missing out on??) I will have 4-5 Seeking Alpha post this upcoming week. I would like to have one extra one but my right-hand man is being coy about sending me his PMFG submission. On that note, remember to enjoy your weekend and LOVE YOUR KIDS if you have them. Think of Russert. He was only 58. My dad was only 73. Do you know the kind of conversations I could POSSIBLY be having with him right now, if he was still alive, compared to when I was a crazy 18 year old? Time is all we have. Trust me, it runs out for everyone. We all will die. This life is only for a fleeting moment in time and it is a crazy world we live in. Live it up and love it up! ALOOOOHA!!!!
Even if it doesn't work out I am already back to almost a 10% gain after the great day in a few stocks I am heavily invested in for the YTD. If a rally would occur now I think I would have no problem beating most of my investing "partners" in the current market. I see a lot of bearishness on bullish stocks and bullishness on ugly bank stocks. That is just what I like to see by the general public. That along with the high NYSE short-interest ratio and no one believing that stocks can rally because Cramer says the market is oversold and an index is giving him a buy signal. This time, for a change, Cramer will be right. Unlike his Action Alert Portfolio which is down 8% YTD; almost an 18% difference in performance YTD. Maybe that is why he has to promote all those books and give away his service for a 50% discount. I can personally tell you right now that he WAS ONCE a GREAT trader. But now he is an also-ran and I hate to admit it but a site I once loved and had the GREAT opportunity to work for, for four months, is now a pile of crap.
The junk that I read on that site today was equivalent to a pile of trash in my backyard. It was simply disturbing for someone that has mastered the CANSLIM system, like me and so many others, to be forced to read the N O I S E that comes from that place. I work for some great sites and every once in a while some great material is out there but overall 80% of it is horrible advice.
Like the recommendation to go long PAL and SWC. I have NEVER heard anyone "so sure" of themselves as this particular writer was but man o man those are charts I would not even allow .01% of my assets to go into. When you have stocks out there like NCOC, ICO, QTWW, MA, CPST, and XIDE, why would you waste your time in stocks losing money? I can give you 5 stocks that start with the letter A that are setup for potential huge gains, IF THE MARKET CAN GET ITS ACT TOGETHER, that is.
I don't care how great a stock is as long as this market wants to do the exact opposite of a previous big day, then we will never make clear easy progress. However, like I continue to tell you, if you are long oil, energy, coal, solar, manufacturing, metals, or mining stocks, you can find a TON of stocks that are great longs. I can give you over 100 great longs right now in a market that is giving such "great professionals" as Cramer an 8% loss.
Not only does Cramer have an 8% loss, but the Stocks-Under-$10 service for TSCM is up a walloping NEGATIVE-14% for 2008. -8% and -14% for PREMIUM service is not too bad. YEAH RIGHT! ICO is up 75% in two months and MA is up 500% in two years. So I guess you really actually have to be more than a mouthpiece to make money in a market that is not in the 1980s and 1990s. This is not your Ronald Reagan and 2nd-term tax cutting Clinton economies right now.
I guess we can tell how good the quality is by the stock price. When I look at TSCM and compare it to some of my oil longs the past few months I see that we have a stock that is not doing well at all in this market. In fact that is an extremely ugly chart. As you can see right after I left, the stock fell apart. ;) All kidding aside, a stock under $10 in a nasty downtrend doing worse than the market is not good. I bet $5 is not far off. I now contribute to Seeking Alpha, Straight Stocks, and iStockAnalyst as they are free and open sites and I prefer to have my body of work put out to the public in my own creative way. I did not write any columns about any stocks the past week, but if you take the time to go to Seeking Alpha and read about all of the stocks that I have profiled up until now (should be about 5-7 so far) you can see that the stocks profiled are doing very well. I would keep an eye out for another 5 stocks that have very nice chart patterns that I want to bring to the attention of readers as possible long-term gems.
There are also other sites I read like Minyanville, Marketwatch, Sharkinvesting, HardRightEdge, and Investors Business Daily. The quality on those site I have found are of higher quality than what is on TSCM. So there are other choices out there, for some of you who have asked me recently where else they can go to get great research. The sad fact is since Gary B. Smith stopped writing for TSCM and RevShark stopped giving small and mid-cap stock picks on Realmoney.com, the site has gone down the tube. now reading SA, MV, MW, SI, HRE, IBD, SS, and iSA are much more enjoyable. However, do not dismiss Alan Farley, Dan Fitzpartrik, Helene Meisler, John Hughes and Scott Maragioglio, Mark Manning, Chris Schumacker, Harry Schiller, or Garry Morrow. They are all great technicians that do a great job on giving good TA coverage. However, sharkinvesting and hardrightedge cover it well also. Not only that but not many talk about Michael Ashbaugh who has a marketwatch.com column for only $300 a year. That along with Jeff Cooper at Minyanville.com make for great side-research to this site.
Other greats to read would be Dan Zanger, old TokyoJoe stuff (no longer available), and EVERY SINGLE BOOK I listed on my website. There is more than enough good information out there, besides the now failing TSCM. What a piece of crap that company has become. Maybe later on if they get rid of David Sterman and bring me back (yeah right, they prefer failures who "tow-the-line" NOW) someone like Kristin they can TRY to get back to that old site I once loved. A lot of recent readers have been asking for more SA articles and I promise I will get them up. This is just my good-will attempt at trying to promote other sites that I read daily and/or have respect for. I also think Brad Koteshwar who wrote two great stock market books has a site. I would like to check that out too. However, I am pretty sure none of them had ICO the past two months or MA the past two years. But heck maybe they had POT, CF, TNH, or SQM for the past five. I would LOVE to see that.
Ken Heebner WAS my favorite mutual fund manager and I DEFINITELY LISTEN TO EVERYTHING he says about the MACRO ECONOMY NOW. However, for those that rush out to buy what he recommends, I want you to remember that he is now a KNOWN MUTUAL FUND manager. When NO ONE knew him, but me and a few other hardcore growth addicts, he had under $500 million in assets. Now the guy has billions. He used to close it ALL THE TIME. Now it is always opened. The old Heebner way of buying stocks is not as easy. It still can be done. But like I was telling someone a month ago, when PBR was 75, to wait for it to pullback to the 50 DMA as Heebner is probably now using CNBC to sell. That person listened and has been rewarded as PBR pulled back right to the 50 DMA at 65 and bounced. I recently saw him recommend POT. PLEASE DO NOT CHASE POT. Will it still run. PROBABLY. But no way in the world can you look at an arithmetic weekly going back to 2002 and tell me that this stock is a "safe" growth stock to LOAD UP on. I know when it is too late. There is still probably another big run left. But the 2000% gains are over.
I am going to be away on the other side of the island all day Saturday so will not get a chance to update the rest of the commentary until Sunday but what I have written so far is a start and now you know where to go to read quality research whenever you are done reading what I post on my site. I am not bein cocky, I am not being an ass, I am being SINCERE. I have looked for a site like mine for 12 years. It took ME!!! to create it as I was looking for a mix of a speculative/momentum/CANSLIM site that produced some huge returns in bull markets and a few other times in super-bullish sectors when the market was bad. Not only that I wanted someone that was good at shorting.
GBS worked for a while, then he left. RevSharks picks were too short term and he was missing the HUGE BULK of the moves. Zanger did not "get involved" enough for me...and so now we have this site. And for those that are current subscribers that have followed my recently longs you know how well the "top performers" have been. The stocks that I have alerted to you as "must buys" have done very well. A few have had VERY BUMPY rides but their trends remain up and they are still making money. There are a few I really like right now that have done very well and I would hope they do AT LEAST another 100% well.
I will be back on Sunday to add some more thoughts (but you should know I am only 50% on following-through with that), HOPEFULLY. If not, then enjoy your weekend and have a great time with your family!!! After hearing of Tim Russerts death, I was pretty sad. 58 years old, only 58. Yet, it appears, to his son, he was invincible. I can only hope I am that kind of dad in the future. Republican or Democrat, Conservative or Liberal, it should NEVER matter when someone who was this kind dies. He was a great man and even though socially and economically I lean VERY Conservative, I must admit "Meet the Press" was a FANTASTIC show to watch on Sunday, when it wasn't football season. He will be greatly missed and must admit I feel deep remorse and sadness from his death.
Subscribers to my website will notice there are a LOT of longs. I will go into full detail on these and which ones are buyable and which ones need to be just observed. There are some real gems in there so make sure before the opening bell on Monday you make it back to check those out. Also for those without a subscription (what are you thinking!!!! SERIOUSLY!!! F the price! Do you know what kind of gains you are missing out on??) I will have 4-5 Seeking Alpha post this upcoming week. I would like to have one extra one but my right-hand man is being coy about sending me his PMFG submission. On that note, remember to enjoy your weekend and LOVE YOUR KIDS if you have them. Think of Russert. He was only 58. My dad was only 73. Do you know the kind of conversations I could POSSIBLY be having with him right now, if he was still alive, compared to when I was a crazy 18 year old? Time is all we have. Trust me, it runs out for everyone. We all will die. This life is only for a fleeting moment in time and it is a crazy world we live in. Live it up and love it up! ALOOOOHA!!!!
Sunday, June 08, 2008
Friday's Reversal Destroys The Euphoria From Thursday; I Did Not Have A Single Long Give A Full Sell Signal (There Were A Good Amount Of Partial Sells
There is no other way to describe Friday as uglier than ugly. When you have 4-losers-to-every-1-winner you can be sure that it was a very ugly day. That ugliness can be blamed on the unemployment jumping to 5.5% from 5.0% which was the biggest gain in 20 years and oil jumping almost $11 and a total of $16 (13% gain) in two days which was also the biggest gain in 25 years when they started keeping records of oil. Economist were expecting the unemployment to only increase to 5.1% so this was a LARGE miss. You can't blame the market for doing what it did today after a miss of that magnitude, along with oil jumping 13% in two days.
However, as I will be doing quite often, as I write this I will try to interject some bullish points to the negative headlines. For instance, it could have been 10-losers-to-every-1-winner. But, actually, that would be bullish as it would show the crowd was extremely bearish and I would be looking to get very long very quickly. Still there is nothing good to say about a day when losers did beat winners by such a strong amount.
As it is and as it was Friday was a horrible follow-through to what appeared to me as a "confirmation of the rally" signal that Thursday seemed to produce. The only really good news is that all my new buys from Thursday held up really well and about half of the new longs actually produced some nice gains (one was up 4.28%). So overall my portfolio while it got a MAJOR whack this week is still up over 10% which is a heck of a lot better than a certain Action Alert portfolio that I am watching right now. So overall I have to admit, it is not as bad as it seemed once the bell rang and the market session ended on Friday. After taking some time to look it over, I have to say that it wasn't nearly as bad as the initial numbers from the market had me believe it was.
Those numbers go like this: the Nasdaq and SP 600 lost 3%, the DJIA and SP 500 both lost 3.1%, the NYSE lost 2.7%, the IBD 85-85 lost 2%, and the IBD 100 lost 1.8% on Friday. As you can clearly see the selling hit everything as only 5 of the 197 industry groups that IBD tracks were up on the day.
The other key measure I always keep an eye on is volume. Volume is key because that is how you know if the market is made up of a bunch of retail traders or if the market is under accumulation or distribution by the real players that drive stocks the pension, insurance, hedge, and mutual funds. Well on Friday, mutual funds were active on the NYSE as volume picked up 17%. But on the Nasdaq, volume was off 1% which shows that the big boys still had no real interest in distributing a lot of stocks. But still the damage was done, volume or no volume.
The euphoria that was starting to permeate the market before Friday's opening bell, imo, was not that "frothy." It seemed to me that there was a lot of poo-pooing of the rally. In fact there was so much "non-believing" in the rally that I was for sure it would continue. However, I know that in bear markets, if we are in fact still in one, I will turn very bullish the exact day that you will top. This happened in 2000, 2001, and in the summer of 2002 more than once. Still, I was able to cut my losses on some of the longs I took, while still gaining some huge wins in some charts that setup really well. That is a lot harder to do now, but as you can via my long-term holding MA and my more intermediate term GEOI PDO and QTWW, getting 100% gains is still very possible as long as you know where to go: pollution, solar, oil, oil, oil, energy, coal, nat gas, metals, mining, ag, and chemicals. There are a couple of other commodity related industries that you can include in that list also.
Speaking of commodities, oil was the talk of the day as it started a climax run on Thursday that is sure to cause a TON of pain for those trying to top tick oil. Oil flew $10.75 to $138.54 which promptly sent my behind to my local gas station to fill up our tanks before a price rise (later that night on the island of Lana'i gas went from $4.71 to $5.11; looked to be a great move on my part). This move in oil sucks and is for sure going to hurt those that drive long distances for work but at the same time you know you are allowed to invest in the United States of America and when you are here you can go long stocks related to the oil&gas industry.
I don't know about you, but since the rally of 2003 started after Bush cut the income and cap gains tax, the Energy sector has given us plenty of gems to help you combat rising gas prices. Instead of bitching about the cost of oil why didn't you go long TGE after the market followed-through on EXTREMELY impressive volume? If you did you are now the happy owner of a 7,833% return. GMXR is up 4,405%, SWN is up 2,820%, MCF is up 2,737%, ALY is up 2,173%, ACGY is up 2,142%, UPL is up 2,109%, and HK is up 2,064%. So there is 8 stocks that could have not only protected you from high gas prices but they could have saved you from your rising taxes, grocery bills, and everything else that will be EVEN MORE EXPENSIVE under an Obama Presidency. How scary does that sound? Yikes!
But besides those 2,000% gems, there have also been another 154 stocks that produced 100% gains since then which more than could have made up for some of that gas you put in your tank. So remember TGE the next time you fill your tank up. Instead of complaining about the cost of gas, you should try, instead, to look for ways to invest in the market that will make up for the losses at the pump. But I know that is not going to happen. This nation has become a lazy, self-absorbed, "daddy, mommy take care of me," country. We are weak and most will not take control of their future as they wait for Social Security to come and disappoint them. Too bad by then it will be too late.
Getting back to the current market which is more than a little nutty. Like RevShark said in his blog this market makes those nuts that think the market is "efficient" look a bit silly. At the same time it doesn't help our charts out at all when the market acts like this. In fact it hurts chart analysis greatly.
But by using charts you also can stay unemotional and look at the market from a point of FACTS and not opinions. By doing that a very surprising thing happened on Friday. Out of 100 stocks out of 10,000 that I am focused on NOT A SINGLE ONE gave a signal to SELL SELL SELL. This is kind of shocking as I expected my recent longs to have done poorly. Instead they continue to hold or rally as 90% of my longs are in the Energy related industries.
It is clear that energy is the only place to be and this can be seen in the IBD 100 and IBD 85-85 index with both outperformed the market on Friday as they were only down 1.8% and 2% respectively which is better than the 3% decline in the Nassy and sp6oo. Also for the week the IBD 100 ACTUALLY PUT IN A STRONG GAIN rallying .8% this week, compared to the 1.9% decline in the Nasdaq, 2.6% decline in the NYSE, 3.4% decline in the DJIA, and 2.8% decline in the SP 500. Those losses for the indexes took out the previously hard-fought gains. Not the best action for a market trying to rebound from a November to January selloff.
This is simply because leading stocks are dominated by energy issues and even though they are nearing the end of their long-term run (look at your LONG-TERM weekly ARITHMETIC charts going back to 2000) their still could be one last violent push higher as they go into a parabolic run and climax top. SWN, PBR, MCF, RRC, DNR, and CNQ are just a few of the stocks that on those long-term weekly arithmetic charts look to be very close to an end of the multi-year run. Still another 100% gain from a parabolic climax run can not be dismissed. It very well could happen especially with oil now going off.
Not only is oil going off, but have you seen the December contract for Corn. Sheesh. That was one heck of a powerful breakout ON VOLUME on Thursday. Corn added to that on Friday. This means not only is gas going to $5 but food is still going higher. I need more setups like DGLY to come along. Even if I only get 30% from it, it is that PERFECT SETUP!! that makes all the difference when going long stocks in bulk. However, it might be a while before too many more show up like that as the rally in the NYSE, SP 500, and DJ-30 is dead. However, the Nasdaq, SP 600, and Philly Semiconductor Index look good and are still holding. If there is more gains coming and this is a one day event, those latter three indexes will kill those former big-cap indexes.
That is if they can keep rallying. I am not happy to see that not much fear was generated after today's selloff. The put/call only jumped to 1.09 which is below two peak reading areas since the August lows, the VIX while it was up 26% on Friday is still only at 23.56 well below the peak reading of 35.60 on 3/17, and the investors intelligence survey saw the bulls jump back to 44% this week. This does not indicate that enough fear was generated yesterday to have us put in a bottom here and that is why I am still a bit fearful that there could be more selling coming. I hope I am a great contrarian indicator.
The one thing I know you must not do right now as we selloff is bottom fish. Bottom fishing is suicide and will leave you stuck in stocks like ABK. I really wish all those people that told me to buy ABK in November would have also asked me to short them the shares. I made a mistake by not going short off those horrible reco's and therefore lost 90% on a powerful short. However, I don't like to break my rules and my rules are more CANSLIM based. Though it may not be easy right now, it is still sometimes very lucrative when you are on the right side of the market in a bear market. That is the beauty about the CANSLIM system. Once you learn to use it right, you can constantly move yourself into the bullish sectors with no problem. That is why we are going long oil stocks and have been making money the past three months while many I know are just spinning their wheels or losing money. I can honestly say I am up 15% and while I normally would be PISSED OFF with such a return at the midpoint of the year, the facts clearly indicated that I am not. Why? I know my methodology will come back to working like gold. Another 1999 or 2003 will happen again and when it does ANYTHING UNDER A 200% annual return is PATHETIC. I expect a 200% return AT LEAST if we have another 2003 market environment. I have to stay positive because this market is making it real easy to get very down on yourself.
Some believe it is safer to protect capital right now and I can not say I disagree with them if you are a newbie. I believe if you are long a stock and it goes up 25%, 50%, 100%, and 200%, you should take 20% gains at each stop. And then when you learn how to spot topping signals and learn to sell stocks as they move higher then you can go back to systematically selling them on the way up. But if you are a newbie make sure you use my fixed result trading. Right now, it is probably safer for the extremely new traders to protect capital but if you are experienced and know what to do there is no doubt that if you get that signal to go long you should go long.
If the put/call can hit 1.5, the VIX can hit 40, and the investors intelligence can see the bulls and bears, we would be in much better position to have another 99 or 03 type of rally where our longs breaking out of beautiful chart patterns can produce some huge wins. Right now, we are no where near there. These numbers strictly do not show enough fear. But when they do there will be no doubt about the facts that we will see better setups that will produce for us better winners that will make us a lot wealthier than what this market can. If QTWW, PDO, and GEOI can do this now with a VIX around 20, imagine the gains of a PDO with a 40 VIX.
There are some things out there that make me think it could be possible Friday was a one day deal. The fact that not a single stock gave me a FULL SELL signal is a huge development as a lot of stocks did give me partial sell/profit taking signals. But the fact nothing said "SELL" is a big clue that this might be a one day event. The other thing that indicates maybe that is not the case is that I had 6 excellent setups for new shorts. So really, to be honest, it is very mixed. And while it is mixed, it remains a stock picking market. And for those following this blog it is obvious there are only a few places to go: energy and metals/mining. This is a development that has been going on for quite some time as oil stocks are the only stocks, besides a few tech, that are breaking out, holding up, and then breaking out again. However, there is not enough and they are not giving us the biggest of gains. But at least it is a start.
This market right now is a bit insane. There is no doubt that this is a headlines driven market that from one week to the next is moved on the most recent economic report or political event. That is not the kind of market that is healthy for those looking to go all-in on margin. This market must be treated carefully, unless your stock picking is around the top of the class. I don't know too many that are getting everything right out there but there are a few of us that have been doing very well when it comes to buying the best stocks that are currently moving in the hot industries. If I wasn't able to go long these great oil&gas stocks that are making me money the past few months, I am sure I would be looking to get about 50% cash heavy. As for most of you I suggest probably getting down TO AT LEAST 25%. I don't think I want to suggest anyone push it here, especially with the way this market is acting. If we recover on Monday and take back everything we lost by the end of the week AND we get quite a few green and max green BOP filled charts setting up in double bottoms, cups, cup with handle, flat base, high tight flag, saucer pattern, and two/three week tight patterns, there is no doubt I will be looking to get long and will be on the hunt for the next near-perfect to perfect setups that will setup out there.
There is no doubt that this is an extremely tough market but I must suggest that YOU DO NOT give up. I know it is hard. It has been very hard since the top of the October 2005 rally that topped out in May 2006. Since then my perfect charts have been hit and miss and before late-2006, it was about only a 10-20% chance that my perfect charts would fail. Recently, it is very much 1/2 and 1/2. Luckily the perfect charts, when they work, are still working very well, while the failures ALWAYS lose 10% or less. Very rarely, if these perfect charts fail, will you ever lose 10%. But at the same time when they work a 100% gain is almost always for certain in under six months. So don't get discouraged.
When should you give it up? Well, if we have a 1999 or 2003 kind of market and I return 300% and some members return 500% and then you LOSE MONEY!!!....yeah maybe it is time to hang it up. But if you are losing money now, don't hurt yourself or be too hard on yourself. Someone, even with a lot of my longs having a great week, I managed to lose almost 20%, as a 35% gain is now around 15% YTD. Very disappointing but if there is more room to run, like these stocks are hinting that there is, I am sure I will make that back up and then some. There was nothing I could do about Friday. There WAS ABSOLUTELY NO WARNING that that breakout was going to turn into a fakeout. The thing is is that sometimes that just happens. The truth of the matter is that we are on day 9 of a new rally still. Unless the Nasdaq breaks below the 50 DMA on huge volume, I will keep the faith that all my nice charts that are still very nice are still going to turn into HOT HOT stocks that will offer me new places to load up.
But until then I will be very careful with my longs. I will keep all new longs and shorts small UNLESS THE chart sets up in a near-perfect to perfect patterns and then those stocks if they have fantastic and strong fundamentals decide that they are going to continue to rally, i will continue to get very long those leading stocks.
Right now, things are not easy, and I suggest new traders be very careful. If you go long MAKE SURE YOU STICK TO THE CANSLIM LONGS ONLY AND IF YOU DO DECIDE TO TAKE THOSE LONGS PLEASE ADHERE TO MY CUT LOSS AREAS. Do not let them pullback any more than I have listed. Do not let losses grow in this market. It is not easy to hit a homerun and when you do hit a HUGE winner like PDO, you want to make sure a bunch (10 to 20) of those profits get locked in and that you can build a powerful positions around the remaining position that you can let run like the way I have let MA run. A nice 520% is my reward for being patient in this big cap winner.
I am extremely tired and I have about 4-5 articles/columns I want to write before my night on Maui is over (it is 630pm). I want to thank everyone, except skeezaroonie (Mark you are a DONKEY!!). This was a great week and I have to say that despite this market treating us like crap, we are still doing very well overall and even though I watched a 35% gain turn into a 15-20% gain, I have to admit I am still long stocks that are basing on heavy buying volume and low declining bottom. If the market takes off again, these stocks are DEFINITELY going to take off again. If the NYSE, SP 500, and DJIA is going to lead the market lower, and will be taking out key support and that then sends the SP 600, Nassy, and IBD indexes into downtrands well then I am ready to cut my losses, take in some shorts, and regroup while I wait for another bottom that will eventually turn the stock market into a big money making machine. Just like it was in 1999 and 2003. However, for now, we are no where near those environments.
For now, we enjoy the pain at the pumps by investing in stocks like PDO, MXC, FPP, and TGC which are acting like pure internet momentum stocks. They are dangerous up here but subscribers to this site are not unfamiliar with any of these names. So many energy stocks, so little time. BigWaveTrading.com's best oil long is MCF. MCF is up 173% from 4/25/07 to 6/6/08. You didn't just make 170%...you made 170% LONG-TERM capital gains. That is darn good. That is why I love this methodology. There is nothing out there on the internet or available in any printed publication that can come close to touching the CANSLIM methodology with my little tweaks.
Aloha and I will see you in the chat room where Chat Blazer has been horrible with their customer service. You may be booted off once in a while for a bit as we try to contract our software provider. You must realize this is happening to EVERYONE and that this IS THE BEST CHAT software for compatibility. Everyone doesn't run windows anymore. Now there are multiple operating systems, firewalls, and anti-virus programs that make it impossible for stuff to work for everyone. This is the best and normally when we have problems they are fixed fast. This has never happened before and if we can host the software on our server and fix this problem trust me I will pay up and have this fixed. ALOHA!!!!!!!!!!!!!!!!!!!!!!!!!!
However, as I will be doing quite often, as I write this I will try to interject some bullish points to the negative headlines. For instance, it could have been 10-losers-to-every-1-winner. But, actually, that would be bullish as it would show the crowd was extremely bearish and I would be looking to get very long very quickly. Still there is nothing good to say about a day when losers did beat winners by such a strong amount.
As it is and as it was Friday was a horrible follow-through to what appeared to me as a "confirmation of the rally" signal that Thursday seemed to produce. The only really good news is that all my new buys from Thursday held up really well and about half of the new longs actually produced some nice gains (one was up 4.28%). So overall my portfolio while it got a MAJOR whack this week is still up over 10% which is a heck of a lot better than a certain Action Alert portfolio that I am watching right now. So overall I have to admit, it is not as bad as it seemed once the bell rang and the market session ended on Friday. After taking some time to look it over, I have to say that it wasn't nearly as bad as the initial numbers from the market had me believe it was.
Those numbers go like this: the Nasdaq and SP 600 lost 3%, the DJIA and SP 500 both lost 3.1%, the NYSE lost 2.7%, the IBD 85-85 lost 2%, and the IBD 100 lost 1.8% on Friday. As you can clearly see the selling hit everything as only 5 of the 197 industry groups that IBD tracks were up on the day.
The other key measure I always keep an eye on is volume. Volume is key because that is how you know if the market is made up of a bunch of retail traders or if the market is under accumulation or distribution by the real players that drive stocks the pension, insurance, hedge, and mutual funds. Well on Friday, mutual funds were active on the NYSE as volume picked up 17%. But on the Nasdaq, volume was off 1% which shows that the big boys still had no real interest in distributing a lot of stocks. But still the damage was done, volume or no volume.
The euphoria that was starting to permeate the market before Friday's opening bell, imo, was not that "frothy." It seemed to me that there was a lot of poo-pooing of the rally. In fact there was so much "non-believing" in the rally that I was for sure it would continue. However, I know that in bear markets, if we are in fact still in one, I will turn very bullish the exact day that you will top. This happened in 2000, 2001, and in the summer of 2002 more than once. Still, I was able to cut my losses on some of the longs I took, while still gaining some huge wins in some charts that setup really well. That is a lot harder to do now, but as you can via my long-term holding MA and my more intermediate term GEOI PDO and QTWW, getting 100% gains is still very possible as long as you know where to go: pollution, solar, oil, oil, oil, energy, coal, nat gas, metals, mining, ag, and chemicals. There are a couple of other commodity related industries that you can include in that list also.
Speaking of commodities, oil was the talk of the day as it started a climax run on Thursday that is sure to cause a TON of pain for those trying to top tick oil. Oil flew $10.75 to $138.54 which promptly sent my behind to my local gas station to fill up our tanks before a price rise (later that night on the island of Lana'i gas went from $4.71 to $5.11; looked to be a great move on my part). This move in oil sucks and is for sure going to hurt those that drive long distances for work but at the same time you know you are allowed to invest in the United States of America and when you are here you can go long stocks related to the oil&gas industry.
I don't know about you, but since the rally of 2003 started after Bush cut the income and cap gains tax, the Energy sector has given us plenty of gems to help you combat rising gas prices. Instead of bitching about the cost of oil why didn't you go long TGE after the market followed-through on EXTREMELY impressive volume? If you did you are now the happy owner of a 7,833% return. GMXR is up 4,405%, SWN is up 2,820%, MCF is up 2,737%, ALY is up 2,173%, ACGY is up 2,142%, UPL is up 2,109%, and HK is up 2,064%. So there is 8 stocks that could have not only protected you from high gas prices but they could have saved you from your rising taxes, grocery bills, and everything else that will be EVEN MORE EXPENSIVE under an Obama Presidency. How scary does that sound? Yikes!
But besides those 2,000% gems, there have also been another 154 stocks that produced 100% gains since then which more than could have made up for some of that gas you put in your tank. So remember TGE the next time you fill your tank up. Instead of complaining about the cost of gas, you should try, instead, to look for ways to invest in the market that will make up for the losses at the pump. But I know that is not going to happen. This nation has become a lazy, self-absorbed, "daddy, mommy take care of me," country. We are weak and most will not take control of their future as they wait for Social Security to come and disappoint them. Too bad by then it will be too late.
Getting back to the current market which is more than a little nutty. Like RevShark said in his blog this market makes those nuts that think the market is "efficient" look a bit silly. At the same time it doesn't help our charts out at all when the market acts like this. In fact it hurts chart analysis greatly.
But by using charts you also can stay unemotional and look at the market from a point of FACTS and not opinions. By doing that a very surprising thing happened on Friday. Out of 100 stocks out of 10,000 that I am focused on NOT A SINGLE ONE gave a signal to SELL SELL SELL. This is kind of shocking as I expected my recent longs to have done poorly. Instead they continue to hold or rally as 90% of my longs are in the Energy related industries.
It is clear that energy is the only place to be and this can be seen in the IBD 100 and IBD 85-85 index with both outperformed the market on Friday as they were only down 1.8% and 2% respectively which is better than the 3% decline in the Nassy and sp6oo. Also for the week the IBD 100 ACTUALLY PUT IN A STRONG GAIN rallying .8% this week, compared to the 1.9% decline in the Nasdaq, 2.6% decline in the NYSE, 3.4% decline in the DJIA, and 2.8% decline in the SP 500. Those losses for the indexes took out the previously hard-fought gains. Not the best action for a market trying to rebound from a November to January selloff.
This is simply because leading stocks are dominated by energy issues and even though they are nearing the end of their long-term run (look at your LONG-TERM weekly ARITHMETIC charts going back to 2000) their still could be one last violent push higher as they go into a parabolic run and climax top. SWN, PBR, MCF, RRC, DNR, and CNQ are just a few of the stocks that on those long-term weekly arithmetic charts look to be very close to an end of the multi-year run. Still another 100% gain from a parabolic climax run can not be dismissed. It very well could happen especially with oil now going off.
Not only is oil going off, but have you seen the December contract for Corn. Sheesh. That was one heck of a powerful breakout ON VOLUME on Thursday. Corn added to that on Friday. This means not only is gas going to $5 but food is still going higher. I need more setups like DGLY to come along. Even if I only get 30% from it, it is that PERFECT SETUP!! that makes all the difference when going long stocks in bulk. However, it might be a while before too many more show up like that as the rally in the NYSE, SP 500, and DJ-30 is dead. However, the Nasdaq, SP 600, and Philly Semiconductor Index look good and are still holding. If there is more gains coming and this is a one day event, those latter three indexes will kill those former big-cap indexes.
That is if they can keep rallying. I am not happy to see that not much fear was generated after today's selloff. The put/call only jumped to 1.09 which is below two peak reading areas since the August lows, the VIX while it was up 26% on Friday is still only at 23.56 well below the peak reading of 35.60 on 3/17, and the investors intelligence survey saw the bulls jump back to 44% this week. This does not indicate that enough fear was generated yesterday to have us put in a bottom here and that is why I am still a bit fearful that there could be more selling coming. I hope I am a great contrarian indicator.
The one thing I know you must not do right now as we selloff is bottom fish. Bottom fishing is suicide and will leave you stuck in stocks like ABK. I really wish all those people that told me to buy ABK in November would have also asked me to short them the shares. I made a mistake by not going short off those horrible reco's and therefore lost 90% on a powerful short. However, I don't like to break my rules and my rules are more CANSLIM based. Though it may not be easy right now, it is still sometimes very lucrative when you are on the right side of the market in a bear market. That is the beauty about the CANSLIM system. Once you learn to use it right, you can constantly move yourself into the bullish sectors with no problem. That is why we are going long oil stocks and have been making money the past three months while many I know are just spinning their wheels or losing money. I can honestly say I am up 15% and while I normally would be PISSED OFF with such a return at the midpoint of the year, the facts clearly indicated that I am not. Why? I know my methodology will come back to working like gold. Another 1999 or 2003 will happen again and when it does ANYTHING UNDER A 200% annual return is PATHETIC. I expect a 200% return AT LEAST if we have another 2003 market environment. I have to stay positive because this market is making it real easy to get very down on yourself.
Some believe it is safer to protect capital right now and I can not say I disagree with them if you are a newbie. I believe if you are long a stock and it goes up 25%, 50%, 100%, and 200%, you should take 20% gains at each stop. And then when you learn how to spot topping signals and learn to sell stocks as they move higher then you can go back to systematically selling them on the way up. But if you are a newbie make sure you use my fixed result trading. Right now, it is probably safer for the extremely new traders to protect capital but if you are experienced and know what to do there is no doubt that if you get that signal to go long you should go long.
If the put/call can hit 1.5, the VIX can hit 40, and the investors intelligence can see the bulls and bears, we would be in much better position to have another 99 or 03 type of rally where our longs breaking out of beautiful chart patterns can produce some huge wins. Right now, we are no where near there. These numbers strictly do not show enough fear. But when they do there will be no doubt about the facts that we will see better setups that will produce for us better winners that will make us a lot wealthier than what this market can. If QTWW, PDO, and GEOI can do this now with a VIX around 20, imagine the gains of a PDO with a 40 VIX.
There are some things out there that make me think it could be possible Friday was a one day deal. The fact that not a single stock gave me a FULL SELL signal is a huge development as a lot of stocks did give me partial sell/profit taking signals. But the fact nothing said "SELL" is a big clue that this might be a one day event. The other thing that indicates maybe that is not the case is that I had 6 excellent setups for new shorts. So really, to be honest, it is very mixed. And while it is mixed, it remains a stock picking market. And for those following this blog it is obvious there are only a few places to go: energy and metals/mining. This is a development that has been going on for quite some time as oil stocks are the only stocks, besides a few tech, that are breaking out, holding up, and then breaking out again. However, there is not enough and they are not giving us the biggest of gains. But at least it is a start.
This market right now is a bit insane. There is no doubt that this is a headlines driven market that from one week to the next is moved on the most recent economic report or political event. That is not the kind of market that is healthy for those looking to go all-in on margin. This market must be treated carefully, unless your stock picking is around the top of the class. I don't know too many that are getting everything right out there but there are a few of us that have been doing very well when it comes to buying the best stocks that are currently moving in the hot industries. If I wasn't able to go long these great oil&gas stocks that are making me money the past few months, I am sure I would be looking to get about 50% cash heavy. As for most of you I suggest probably getting down TO AT LEAST 25%. I don't think I want to suggest anyone push it here, especially with the way this market is acting. If we recover on Monday and take back everything we lost by the end of the week AND we get quite a few green and max green BOP filled charts setting up in double bottoms, cups, cup with handle, flat base, high tight flag, saucer pattern, and two/three week tight patterns, there is no doubt I will be looking to get long and will be on the hunt for the next near-perfect to perfect setups that will setup out there.
There is no doubt that this is an extremely tough market but I must suggest that YOU DO NOT give up. I know it is hard. It has been very hard since the top of the October 2005 rally that topped out in May 2006. Since then my perfect charts have been hit and miss and before late-2006, it was about only a 10-20% chance that my perfect charts would fail. Recently, it is very much 1/2 and 1/2. Luckily the perfect charts, when they work, are still working very well, while the failures ALWAYS lose 10% or less. Very rarely, if these perfect charts fail, will you ever lose 10%. But at the same time when they work a 100% gain is almost always for certain in under six months. So don't get discouraged.
When should you give it up? Well, if we have a 1999 or 2003 kind of market and I return 300% and some members return 500% and then you LOSE MONEY!!!....yeah maybe it is time to hang it up. But if you are losing money now, don't hurt yourself or be too hard on yourself. Someone, even with a lot of my longs having a great week, I managed to lose almost 20%, as a 35% gain is now around 15% YTD. Very disappointing but if there is more room to run, like these stocks are hinting that there is, I am sure I will make that back up and then some. There was nothing I could do about Friday. There WAS ABSOLUTELY NO WARNING that that breakout was going to turn into a fakeout. The thing is is that sometimes that just happens. The truth of the matter is that we are on day 9 of a new rally still. Unless the Nasdaq breaks below the 50 DMA on huge volume, I will keep the faith that all my nice charts that are still very nice are still going to turn into HOT HOT stocks that will offer me new places to load up.
But until then I will be very careful with my longs. I will keep all new longs and shorts small UNLESS THE chart sets up in a near-perfect to perfect patterns and then those stocks if they have fantastic and strong fundamentals decide that they are going to continue to rally, i will continue to get very long those leading stocks.
Right now, things are not easy, and I suggest new traders be very careful. If you go long MAKE SURE YOU STICK TO THE CANSLIM LONGS ONLY AND IF YOU DO DECIDE TO TAKE THOSE LONGS PLEASE ADHERE TO MY CUT LOSS AREAS. Do not let them pullback any more than I have listed. Do not let losses grow in this market. It is not easy to hit a homerun and when you do hit a HUGE winner like PDO, you want to make sure a bunch (10 to 20) of those profits get locked in and that you can build a powerful positions around the remaining position that you can let run like the way I have let MA run. A nice 520% is my reward for being patient in this big cap winner.
I am extremely tired and I have about 4-5 articles/columns I want to write before my night on Maui is over (it is 630pm). I want to thank everyone, except skeezaroonie (Mark you are a DONKEY!!). This was a great week and I have to say that despite this market treating us like crap, we are still doing very well overall and even though I watched a 35% gain turn into a 15-20% gain, I have to admit I am still long stocks that are basing on heavy buying volume and low declining bottom. If the market takes off again, these stocks are DEFINITELY going to take off again. If the NYSE, SP 500, and DJIA is going to lead the market lower, and will be taking out key support and that then sends the SP 600, Nassy, and IBD indexes into downtrands well then I am ready to cut my losses, take in some shorts, and regroup while I wait for another bottom that will eventually turn the stock market into a big money making machine. Just like it was in 1999 and 2003. However, for now, we are no where near those environments.
For now, we enjoy the pain at the pumps by investing in stocks like PDO, MXC, FPP, and TGC which are acting like pure internet momentum stocks. They are dangerous up here but subscribers to this site are not unfamiliar with any of these names. So many energy stocks, so little time. BigWaveTrading.com's best oil long is MCF. MCF is up 173% from 4/25/07 to 6/6/08. You didn't just make 170%...you made 170% LONG-TERM capital gains. That is darn good. That is why I love this methodology. There is nothing out there on the internet or available in any printed publication that can come close to touching the CANSLIM methodology with my little tweaks.
Aloha and I will see you in the chat room where Chat Blazer has been horrible with their customer service. You may be booted off once in a while for a bit as we try to contract our software provider. You must realize this is happening to EVERYONE and that this IS THE BEST CHAT software for compatibility. Everyone doesn't run windows anymore. Now there are multiple operating systems, firewalls, and anti-virus programs that make it impossible for stuff to work for everyone. This is the best and normally when we have problems they are fixed fast. This has never happened before and if we can host the software on our server and fix this problem trust me I will pay up and have this fixed. ALOHA!!!!!!!!!!!!!!!!!!!!!!!!!!
Sunday, June 01, 2008
Very Bullish Week Ends With Us Set Up For Some Big Gains
It was nice to see oil stop rising to the moon and for stocks to still continue higher as a constant rotation from commodity into higher quality tech stocks does seem to be evolving. In fact, it appears commodity stocks are going to continue higher with those new leaders that are starting to emerge. I can only pray that this trend of prettier charts and higher quality longs continues to show in the market.
There is no doubt when you see longs like HRS, PVA, FMC, COP, FST, JOYG, TUP, CRK, BUCY, and CLR move like they did today that we do not have some sort of speculative action in oil longs. Along with this action, you can see a lot of technology industries moving higher on the list of IBD industry groups. There is only one way to spin that: bullish.
The great thing that some commentators were actually complaining about being "nothing more than window dressing" was that volume did increase on the Nasdaq and on the NYSE with Friday's strong gains. I am not sure how they can spin that as bearish but they tried and probably succeeded amongst the masses as the majority of people I talk to HONESTLY believe we are in a recession. YET when I ask them how they are doing it doesn't seem to be at recession levels. So the facts remain that this is a much stronger market than anyone is giving credit for.
Not only was volume higher and above average on the Nasdaq but remember for the first time in almost a full month's worth of trading sessions the NYSE enjoyed volume above average on an up day. The Nasdaq is above the 50 and 200 day moving average...and is making gains on higher volume? Folks, I don't know about you but I know I do not want to be bearish even if the action is weak. And it is weak, there is no doubt about that. I still do not have any PERFECT charts and the near-perfect charts are still not producing HUGE GAINS IN extremely short period of times like they NORMALLY do in roaring bulls. So do not think this is 1999 or 2003. I doubt we are going to get any 1000% gainers, with a 18 VIX.
The good news included within this is that the market was just under a little bit of selling pressure and immediately has shaken it off. Are the skies all clear? Absolutely not. But I tell you what, thinks are looking better. I have a lot of stocks that have made some big gains in some short amounts of time but I am still waiting for a couple of more beautiful perfect stocks to setup and breakout on higher volume before I can get super bullish. But still the fact that we can bounce back so fast from a pickup in selling and after six days of distribution in the SP 500 and DJIA that is a bullish development; not bearish.
To go back to the "we are not in a bear market" rant again. The revised 1st quarter GDP was moved up to .9% and with a show of income growing faster than inflation I find to see where we are in a recession. Oh well. This just goes to show that following the price action of leading stocks, which while not being EXTREMELY BULLISH is STILL bullish none-the-less, is the most important factor in deciding when to go very long the market or rather to not go long at all. The market is telling us that it "is a bull market" (for those that have read "Reminiscences of a Stock Operator" you know what that means) and you will need to act accordingly. But remember this is a very lame rally for the time being and the market is going to have to prove a LOT MORE to me before I get too wildly involved with margin.
But I have to admit it would be nice to get some profit taking signals and some more climax runs so that I can shift topping stock's money to stocks that have a fresh rally ahead to come. Remember, a FRESH breakout to a new 52-week high is bullish; a 100th breakout to a 52-week high is bullish....but do you want to buy that breakout? Think about it.
Keep it simple, the trend is up for now. Aloha and I will see you in the chat room!
There is no doubt when you see longs like HRS, PVA, FMC, COP, FST, JOYG, TUP, CRK, BUCY, and CLR move like they did today that we do not have some sort of speculative action in oil longs. Along with this action, you can see a lot of technology industries moving higher on the list of IBD industry groups. There is only one way to spin that: bullish.
The great thing that some commentators were actually complaining about being "nothing more than window dressing" was that volume did increase on the Nasdaq and on the NYSE with Friday's strong gains. I am not sure how they can spin that as bearish but they tried and probably succeeded amongst the masses as the majority of people I talk to HONESTLY believe we are in a recession. YET when I ask them how they are doing it doesn't seem to be at recession levels. So the facts remain that this is a much stronger market than anyone is giving credit for.
Not only was volume higher and above average on the Nasdaq but remember for the first time in almost a full month's worth of trading sessions the NYSE enjoyed volume above average on an up day. The Nasdaq is above the 50 and 200 day moving average...and is making gains on higher volume? Folks, I don't know about you but I know I do not want to be bearish even if the action is weak. And it is weak, there is no doubt about that. I still do not have any PERFECT charts and the near-perfect charts are still not producing HUGE GAINS IN extremely short period of times like they NORMALLY do in roaring bulls. So do not think this is 1999 or 2003. I doubt we are going to get any 1000% gainers, with a 18 VIX.
The good news included within this is that the market was just under a little bit of selling pressure and immediately has shaken it off. Are the skies all clear? Absolutely not. But I tell you what, thinks are looking better. I have a lot of stocks that have made some big gains in some short amounts of time but I am still waiting for a couple of more beautiful perfect stocks to setup and breakout on higher volume before I can get super bullish. But still the fact that we can bounce back so fast from a pickup in selling and after six days of distribution in the SP 500 and DJIA that is a bullish development; not bearish.
To go back to the "we are not in a bear market" rant again. The revised 1st quarter GDP was moved up to .9% and with a show of income growing faster than inflation I find to see where we are in a recession. Oh well. This just goes to show that following the price action of leading stocks, which while not being EXTREMELY BULLISH is STILL bullish none-the-less, is the most important factor in deciding when to go very long the market or rather to not go long at all. The market is telling us that it "is a bull market" (for those that have read "Reminiscences of a Stock Operator" you know what that means) and you will need to act accordingly. But remember this is a very lame rally for the time being and the market is going to have to prove a LOT MORE to me before I get too wildly involved with margin.
But I have to admit it would be nice to get some profit taking signals and some more climax runs so that I can shift topping stock's money to stocks that have a fresh rally ahead to come. Remember, a FRESH breakout to a new 52-week high is bullish; a 100th breakout to a 52-week high is bullish....but do you want to buy that breakout? Think about it.
Keep it simple, the trend is up for now. Aloha and I will see you in the chat room!
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