July 7, 2008
If this is the case, as you can see, I KNOW there is only one smart thing to do and that is to raise cash. That is what I have recently been doing.
In early 2007 my account when through some volatile stages and is doing the same thing now. With my gf account down almost 3% and my accounts up only 10% YTD after SO MUCH HARD work it is obvious to me the stock market bull market since 2003 is near over. I said this in November and made money as stock came down but so many believed the real bottom was in on March that I guess we all put out “we have topped thesis on hold.” Well it looks to be back on after so many stocks have failed what was starting to look like nice long patterns. The most disturbing failures range from BRKR, BKE, AEHR, ACM, DGLY, along with a few more this year and other stocks like INXI, BLL, ESEA, FALC, and a few others last year. This is my clue that the commodity bull market from 2001, that has most people thinking our dollar will be worthless and gas will be a t $10 very soon, is running into a top in the near future and most of those stocks are nearing tops with their current chart patterns.
Look at weekly charts of the Big Oils, The little oils, the chemical-fertz, the chemicals, or another other commodity related stock some of you are asking me if we should be buying. LOL. Well, maybe if we were reading IBD together back in 2000, when the market was rotating into these commodity stocks. Some of you want to buy TNH, MOS, POT, and the other fert stocks after 5000% perfect CLIMAX PARABOLIC runs that have now seen some of the stocks make some “interesting” splits to get the publics money into these stocks. Do some of you NOT ever look at a WEEKLY chart going back to 2000 on an arithmetic scale before thinking of buying some of these names like PBR, SCHN, MT, or CVX. While they are not at JDSU, QCOM, SDLI and the extreme nature of internet stocks. Seriously!, the noise on CNBC and the radio about commodity, oil, and precious metals are still near topping pitch.
Now if you are still long TNH and MOS, like I was for a 300% and 400% gain, from 2006-2007 by all means continue to hold. But if you are thinking of buying now you really need to get into a habit of looking at arithmetic weekly charts that go back at least five years. That way you can make sure you are not buying a stock that it already up 3000% to 5000% that is splitting on you to make the stock seems attractive but yet it is the smart money finding the dumb money to sell into it. So watch for that.
Also I am currently long still one stock that is of size. I do still have some oil, chemical, gold, steel, and other energy related longs in uptrends that I am holding. But a lot of our new hot charts like DGLY (which we will count as it did give us a 50% gain) and worse off AEHR are just picking up where BKE and BRKR or this year and ESEA INXI BYI BLL and FALC ended of last year. Those pefect patterns used to never fail but in a bullish uptrend those HOT patterns are nearly 80% to 100% automatic. I know I hark on these failures a lot but you must remember from 1996 to 2006 (with over 50 of my best and still around 20 from the 2004-2008 period that still needs to be posted including about 10 from 1999 that were SO HOT but I can’t get you a tcnet chart anymore) whenever a super hot pattern showed up in an uptrend ESPECIALLY but still even in a downtrend they were OK to get long.
But maybe proving the thesis that what 2003 was just a bear market rally and But maybe proving the thesis that what 2003 was just a bear market rally and that the real kind of 1980s and 1990s kind of rallies are a ways off. Whatever it is I am ready for it. Subscibers see this be watching me sell off the losers, stop going long poorly quality stocks But maybe proving the thesis that what 2003 was just a bear market rally and But maybe proving the thesis that what 2003 was just a bear market rally and that the real kind of 1980s and 1990s kind of rallies are a ways off. Whatever it is I am ready for it. Subscribers see this be watching me sell off the losers, stop going long poorly quality stocks, going long only a little bit of the few great CANSLIM stocks that are left, and watch me raise cash as the market clearly weakens.
It started to look like some stocks wanted to come alive and make some money. One clearly did. We were very long PDO and I have sold it all off after it announces a split into the run up. It is very quite posible it is going higher but I had a very nice size position and took in a 370% gain from 5/9 to 6/24 with a VERY LARGE position from June 5th to June 24th giving me a 110% return that helped take an account only up 3% back up to up 20%. Since the ACM falloff from Friday along with the other 27 CANSLIM quality stocks that still make up a much larger % of my ports from my 22 short positions, I am now back up to only a 10% gain. But heck guys at least I am being honest and telling you this is the hardest i have ever seen it.
I have friends here on Maui that have seen me go day-by-day through a LMLP MRVC example in 1999, have seen me go through CRUS of 2000, GNSS of 2002, ALL OF MY 2003 (including FMDAY, TASR, EGHT, TRAD), IST in 2004, and HRZ of 2006 and THEY ALL CLEARLY see how easy it was. They all also understand it was because it was still a more fresh environment.
As many of you can see now, with AFSI TESO APPY RICK and OMNI being the truly beauties that were easy to spot and say “yes, definitely, go with those to make money. However, it was weak and this year the peformance of PDO was great but the only other one that has worked has been DGLY. I don’t know how to say it any other way but it is time to raise cash.
Another reason for raising cash is clear to me because the investors intelligence shows something like 45% bears to 31% bulls. This is a major contrarian signal but you need the CANSLIM stocks to start moving higher first. For now that is not happening and with the put/call also showing a bit of fear with a 1.01 reading. However, the most important thing telling us if there is real fear int he market o make money for those brave enough to go long is telling us that more pain is in store: the VIX at 24.80 is no where near a fear level of 40 or better yet 50 that can set us up with those AEHR, DGLY, and 2007 stocks that failed. Soon things will be back to normal but for now protecting your capital for those times when my PAST BIG WINNERS are ready to really work for me again is what I will be doing.
Some of us will be able to benefit going short but if you are a newbie and do not have a track record of making big gains in big bull markets and beating the market in other periods, I would give yourself time to learn how to do this the right way. Don’t start shorting the market until you first learn how to make money on the long side. That is my final advice for the night. I am going to bed and I hope that you all have a GREAT Fourth of July!!!
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