Tuesday, August 19, 2008

The Nasdaq Continues To Fail At The 200 DMA On Lower Volume; You Don’t Need Heavy Volume To Start A Nasty Selloff

August 20, 2008

I have to admit that I saw this failure coming a MILE AWAY and have been fully prepared for it and all of my platinum members can verify this as I have been saying repeatedly that this rally was going to fail. Yet I still had NEWBIE subscribers trying to buy breakouts left and right.

Part of the problem is that I will mess around with a few hundred dollars in a stock out of a very large cash amount. Most of you can not dink around like me and must wait for a perfect setup (like XSI was close enough to) before you make your move. I will go out and buy stocks like GXDX. But that in no way, in this market, that is going nowhere, is any kind of signal for you to buy stocks.

I don’t know why some of you don’t get it but it always seems to be the cocky-ignorant-uneducated-newbie that comes into the market thinking “there is always a time and a place to make big money. The truth is if these “fools” would take the time to read the classic stock market literature and listen to the professional about not trying to go long in a tape that is moving anywhere maybe some of them would have a little bit extra money in their pockets.

But nope, instead they try to “outsmart” the market which always ends up humbling them and the next thing you know they are in a 50% correction whereas if they would have just stayed out they would have avoided all the pain.

I have spent some recent time the past few days posting videos and in some of those videos I showed you the difference between how a LOT of stocks looked then back in 1999 and 2003 when perfect max green BOP and heavy accumulation charts were everywhere and compared that to the current crop of nothing that doesn’t exist out there now and it becomes apparent that the time to do nothing is upon us. Some day that will change but for now with the Nasdaq re-rolling below the 200 DMA on strong volume, The NYSE and SP 500 refusing to retake the 50 DMA with the 20 DMA trailing right behind it, this market is in no way in any way shape or form ready to be bought. Especially with the leading Chinese stock market index the Shanghai Composite rolling over and hitting new 52-week lows on strong volume. And they are not hitting new lows barely. The last attack I saw was a 5%-plus plunge lower well into new 52-week low land. How can the people involved in our markets be looking for such a move when the indexes are hitting lows on such powerful price declines with little to no charts that are setup in winning stock positions.

No matter what you believe about supply or demand I am telling you right now that there is NO demand for stocks. That is why you are seeing a very low volume selloff. Eventually people believe people have to step in and buy stocks but I don’t know I just prepare myself for some potential big gains on the upside (but first I need my green to max green BOP charts to show up or else I KNOW the stocks will not hold on to their gains and I will end up with nothing to show for all my hared work) or prepare myself for some damage to the downside which is more and more what it looks like that will happen.

However, right now we are still in a big nasty flop and chop market that is giving trend following investors some whippy rides and that means that pocketing your cash and leaving them on the sidelines remains the right play. I believe that if this market continues to move sidways and continues to do this with volume contracting and contracting that it will not lead to a new bull market and instead it will rollover and start another leg down. This leg down is what we need to try to convince people that the market can come closer to putting in a real rally.

I keep telling everyone the more you all keep looking for a bottom. WHICH IS EVERYONE OF YOU NEWBIES. The longer it is going to take to make a real bottom come along. If you do not get a market bottom within the first six months the chances are that it will take 24 months before you get a bottom. That is because if a big crash does not come along and scares everyone out in the first six months what normally happens is you have to go through a series of rallies and failures that eventually lead to a bottom that wears everyone out. By the time this bottom happens so many people have lost interest in the market that those that are still around are the lucky ones that end up getting filthy rich as the green to max green BOP setups on super star stocks that go on to produce amazing gains. All you need to know to prove that is to go back and study my own work in 1999, 2003-2006, and the occasional stocks in 97, 98, 01, 02, 07, and 08.

The bottom line is that in this summer doldrum do not make any crazy large bets as ALL of the institutional mutual, pension, and hedge funds have gone on vacation. Keep your trading small and do not go long stocks that are anything less than perfect. This market is too dangerous to go long. And for further info please do not go short until volume picks up on the downside. Right now, the market is stuck in a dangerous VERY LOW VOLUME range where prices are going nowhere.

To sum it up from February 4, 2008 to August 19, 2008 the Nasdaq has moved a WHOPPING .06%. Do you really HONESTLY think we can make big money in a market like this???? Folks it is just as bad going a full another month back. From January 16, 2008 to August 19, 2008 the Nasdaq is down -0.43%. How do you make money in a market that does not have an up or downtrend when you are a CANSLIM/momentum/growth investor. I’ll tell you: you don’t!!! You exercise patience so unlike all the SUCKERS that gave up in 2002, you can be ready for the next TASR HIL SINA SOHU NTES EVOL EPIC NTES FMDAY EGHT and so many others. And if we ever have another 1999, we could get stocks that make 500% to 1000% moves in months. I doubt we will ever have a Y2K speculative no-earnings momentum market like that ever again. And that is just too bad.

For now, stay patient, keep a tight lid on your cash, wait for that perfect long setup (something similar to XSI), or wait for that perfect short setup. We have plenty of time and as long as volume stays this far below the general 50 day volume average there is nothing to do. Keep a tight lid on your wallet. There are no shorts and there are no longs. Enjoy your summer vacation while it last.

Hopefully it is not spoiled by an up and coming possible selloff. But I tell you what when you see only see 21 new 52-week highs to 210 new 52-week lows it sure doesn’t help support the bulls case that higher prices are coming along. But heck more chop proves to be in store with a put/call at 1.09. There is fear, there is euphoria, and there is apathy in this market. Some pretty strong emotions leaves to some major battlegrounds. I don’t know how long we can go sideways but I bet it can be a lot longer than mot of you think.

But heck no matter how long we move sideways, that is your perfect time to read every book published by John Boik who profiles all the greatest traders and monster stocks throughout the past. This also gives you plenty of time to read HTTMIS by O’Neil and Reminiscences of a Stock Operator by Lefebvre (about Livermore). This also gives you plenty of time to study EVERY SINGLE ONE OF MY PAST BIG WINNERS. ESPECIALLY THE MAX GREEN LOADED BOP charts of 1999 and 2003.

And one last reminder for gold and platinum subscribers: I have started to upload videos and believe once Bob gets the next two up tomorrow I will have around 5-6 excellent videos where you can hear me describe in deatail what I am looking at on my screen. The feeback has been BEYOND AMAZING!!!!! Thank you all for your kind comments. I am so glad you love the videos. We will have a new one every day over a new subject and we will off the freeloaders a freebie weekend post since they are too cheap to pay for my INVALUABLE service. ;)

Aloha and I will see you winners in my chat room around 12pm to 2pm EST. ALOHA!!!!!!!!!!!!

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