Monday, August 11, 2008

Nasty Intraday Action Continues To Remind Me To Be Careful With This Rally

August 11, 2008

Some people are all excited and think the worst is over, even though there has not been a single up day on the indexes where volume was clearly huge that it was obvious institutions were back at work. For those that don’t think that is a big deal, I assume you don’t like making any kind of decent return on any long. For those of you who love to daytrade, I guess it doesn’t matter.

Sadly, this matter to us longer-term Home Run hitters. We still don’t have anything to get too excited about. I have two new longs tonight that look great and on Friday I gave you a near perfect chart pattern that produced a one-day huge grand slam with a 27% return today. Now that is how all of my longs are supposed to act in a bull market. And that is just that, if this was a bull market I would still be long the full 100% of CRD.b, but instead I am selling 25% into the big 27% one-day price gain. That is the difference between a bull and a bear. In a bull, you don’t sell the pops. You hold so that you can hit some big winners (I posted another 11 this weekend from 2004-2006) that can help turn you into a millionaire from a thousandaire. However, in a bear market, you just sell the pops. Because, eventually things run into resistance and return back to where they came.

One item of key resistance came with the Nasdaq’s 200 day moving average which seemed to halt the indexes advance that it was having today. Around 2pm EST it looked like the market was on to another short-squeezing (due to the low volume that is how we know it is a squeeze and not real accumulation) big pop. But instead the indexes reversed off the highs and the DJIA even dipped into the red to really emphasize to those that think the coast is clear that the coast is not clear. This reversal leaves us with negative candlestick bar charts on all our index charts. That combined with the higher volume is not bullish. To add to the gains the put/call ratio fell to a complacent .75 signaling that those that saw the pullback were still bigger believers in the rally.

If you are a super-short-term trader nothing is wrong with being bullish here. But for those of us who have been around longer than one year and have studied the market going back to 1896 personally (have read books going back to 1880) you start to realize that you are dealing with just a bear market rally UNTIL YOU ARE NOT. How do you know when you are not in a bear market rally. You have powerful follow-through days up between 3 to 5% with volume 20-30% higher than the day before. But not only that you have HOT! HOT! HOT! CANSLIM quality longs setting up all around you with broad leadership.

Right now, we have none of that. The only leaders we have our medical stocks. Medical stocks are our leading stocks and though there is nothing wrong with that, medical stocks leading while stocks are being destroyed all around us does not equal a bull market. What does equal a bull market? Simple. I want to see internet, semiconductor, computer, software, retail, banks, and other technology related stocks moving higher. Not anything that has to be used all the time like food, medical, and commercial services. I want real leadership.

You only get that in real bull markets and you only get real bull markets when the public gives up. With a VIX at 20 and a put/call at .75, you can be sure the public has not given up. I personally, after being a part of the bull market from 2003-2007 believe it will take a LONG TIME to knock out all the late “I wanna be a traders.” These newbies (about 90%) will have to give up from this difficult market before charts of late 2002 to late 2004 come back. How do I know too many newbies are around?

I have nothing but past big winners literring my website for those people interested in learning how to invest the right way to learn. However, even when stocks like ANTP in 2004 go up 300% in under a month some people ask me “is it too late to get long now and have I missed the rally.” This just shocks me that I have so many stocks up over 300% in late 2003, stocks up over 200% in 2004, and a couple of stocks move up over 500% in 2005 (BOOM and ERS) and yet people still ask me “that they think it is too late and they have missed most of the gains.” Well in a bear market, probably. But that is not why you are here. You are here to WAIT for the pefect chart pattern and then ATTACK. No matter what year it is in. Most of the best stock chart patterns come MONTHS AFTER markets make thier lows during a downtrend. Most of the greatest stocks of all time did not come on the day of the FTD (some did). Most came within the first month but still a TON (JUST BY REVIEWING MY SITE YOU CAN SEE THE PROOF FOR YOURSELF!!!) come months and months and even years after the FTD bottom.

Only those inexperienced or just plane ignorant of the market would make these kind of statements. However, I keep seeing them. So that with the fact that they are all looking for a bottom proves to me we are not yet at a bottom. I PRAY I AM WRONG AND THAT HOT! HOT! HOT! charts continue to form and that possibly if the market can get its act together, yet at the same time scare the public, we can have a LOT of base on base patterns. However, this remains to be seen. I personally think too many new investors are bullish and are looking for a bottom. As long as people are looking for a bottom there will be no bottom.

However, there are sure to be rallies to make money on the long side in this longer-term bear market that we are more-than-likely in. We already had PDO, DGLY, CRD.b, and XCO this year. They were not great. But they still made us enough money to make up for all the other mistakes made this year. It does NOT get any harder than this. Since January the market has not moved very far and that is obvious in all my accounts as they range from down 7% (was 4% until OFI) to up 9% (thanks to CRD.b). This is the worst market I have ever been a part of and before I make another huge move in the market the chart must be perfect and the trend must be up.

I ask you. Is the NYSE above the 50 or 200 day moving average? No!. Is the Nasdaq above the 200 DMA? No! Did the Nassy take the 50 DMA on the FTD? No! Did the SP600 retake the 50 and 200 DMA on strong volume in a nice round base? No! Are there more than a handful of HOT! charts setting up? No! Then why are we trying to call a bottom here?

CASH IS KING, even when a few stocks are moving up. I don’t play for nickles. I play for the big money. The big money can not be made right now. Be very careful out there and wait for more charts like APII to setup (if you don’t have Telechart you can see the stock in the forums by searching for APII). If you are not a subscriber to this site or to Telechart, what is wrong with you? Don’t you want to be the best? When I see APII charts setting up everywhere and see max green BOP dominate charts during the past three to six months, then I will get as bullish as all the newbies who are having “moments of grandeur” over a very weak 10% bounce. They seriously don’t come much worse than this. There are simply too few nice charts out there. When I see a lot more, you will notice a HUGE change in my writing.

For now it is all defense until EMIS, USAK, and APII charts start setting up all over the place in stocks that trade OVER $10 and OVER 100,000 shares a day. Until then, CASH IS KING! ALOHA!!!

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