Wednesday, August 13, 2008

China’s Shanghai Composite Index Is Hitting New 52-Week Lows, Our Nasdaq Is Failing At The 200 DMA, Our DJIA Is Failing At The 50 DMA, And Yet I Keep

August 13, 2008

I am not sure why so many of you are bullish and for sure that you are “missing out” on some of the new gains of a fresh new bull market but last time I checked we have amazing charts in good strong bull markets. We don’t normally see the amount of distribution that litters the charting landscape right now. Normally, many charts, if you have hit a bottom, will be rallying on strong volume, with green to max green BOP, and with nice tight price action signaling that the weak flippers have left the stock market.

I know some of you do not like to hear this but China has been the leading index for years now. There GDP trumps our GDP and they are the industrial powerhouse now. The fact their index has fallen so much since the November top should be all the news. But I don’t here much talk about it. Too bad because a lot of lesson can be learned here. The fact that we have only fell around 20% while China has fell over 55% it can be said Relative Strength wise we are doing much better. But it also tells of how speculative Chinese stocks got. You don’t fall almost 60% unless your market was in some sort of bubble. What lesson should we learn. Well, I am not sure how much longer we are going to fall but I want to point out something on the SSEC-X (on Telechart).

In December the Chinese market started a rally. I am sure many were for sure that was a bottom. Nope. THen in February stocks started inching higher. I heard many say then (but Market Speculator was saying that the top was in) that the bottom was in. Nope. It continued to selloff till the April bounce. That for sure was the bottom right? Wrong again, as price went nowhere for around a month and then fell out of bed again. In July we saw yet another start of a rally. I heard from some that now that the Olympics were here that the Chinese market has bottomed and now it was clear sailing as the Olympic games would reignite the vigor for Chinese stocks. Whoops. Here we are rolling over yet again, hitting fresh new 52-week lows with the market selling off 4.47% on Friday and then falling a whopping 5.21%. That sent it to new 52-week lows and once again burned the bottom callers.

This should just be yet another lesson to those who can’t help calling bottoms. Do you remember the psycho women who told me to buy banks in January. She gave me great stocks to hold for the long-term that were bargains like LEH. What sage advice. Glad I didn’t listen. Bottom callers will FOREVER continue to be burned. Until they learn that the proper way to speculate is to buy high and sell higher in a bull market and to keep your cash in the coffers while in a bear, they will NEVEr succeed.

Those that bottom call are an egostical bunch and history has proven their strategies are far riskier and lackluster compared to the CANSLIM system which has constantly been in the top 2 to 3 methodologies when it comes to performance ratings since 1998. This is out of over 46 different systems. So this is no small sample. The CANSLIM system in good markets will make you filthy rich when you learn how to use it correctly. In a bear market it will save you from financial ruin. In a bull market value/bottom callers will do well (if they are skilled like Martin Zweig who uses a bit of CANSLIM with his value investing) only if they are the best. Most will not be able to make the gains the momentum/CANSLIM investors can make in uptrending markets. Just review my “past big winners.” I posted a new one today.

You can see the clear pop in price, volume, BOP, Relative Strength, and Moneystream that make it an obvious long to take a lot in. That was only a 133% gain from buy to top but how many “bottom callers” are making these kind of returns. Study my “past big winners” in the bull markets of 99, 03, 04, 05, an 06 and tell me that buying banks in January was smarter than going completely to cash. By the way while she would have had me short LEH, JPM, and MER–which ALL would have BROKEN me (thanks Sandy/Wendy–great advice!!)–I was able to go long XCO, PDO, and DGLY. The stocks I went long went up 50%, 100%, and 50% making this bear market a manageable market to keep my accounts above water. Meanwhile her suggestions would have left me B R O K E!!! Buying falling stocks if for suckers. Only suckers buy stocks that are falling in price. Especially in a bear market.

Please, don’t be a wall street sucker. Be a BIG WAVE winner. Trust me the bottom callers don’t make you a fortune in bull markets. My CANSLIM/momentum methodology can and IT WILL to the winning investor that learns to play the game the right way. Rule one: Put the odds in your favor. Those of you buying stocks in a downtrending need to stop. This is a losing game and it is going to cost you big if this market cracks wide open like China.

I want a bull market badly but until APII and EMIS charts with all that max green BOP and green price bars litter my charting landscape in higher quality names I refuse to get bullish on this market. Be careful out there and remember until a real follow-through day on much higher volume with a huge price gain that takes all the indicies above the moving averages, I will not be able to get bullish on this market. Study EMIS and APII to learn what I want to see all over the place before I will begin to call a bottom. If you don’t have Telechart, you wil not be able to see the green to max green BOP. Therefore I posted them in my forums. If you are a gold subscriber you may go there to take a look.

Aloha and I will see you tomorrow around noon EST. ALOHA!!

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