September 13, 2008
Well, well. It certainly was an interesting day on Friday as more horrible drubbings hit WM, AIG, and LEH. Add that to FNM, BSC, FRE, and the previous insurance stocks and you can see how a lot of people have probably had their you know what handed to them. If they were on margin at any point trying to “find” the bottom, it is probably a lot worse.
But as everyone that has been reading this blog has known, you NEVER hold stocks that are trending below the 50 day moving average with the 200 day moving average trending above the 50 day moving average. These stocks are not only ugly and laggards but they are clear GET OUT signals. Anytime you are in a stock in an uptrend and they roll over and a “death cross” happens while the stock is moving lower, it is time to get out–NO QUESTIONS ASKED. You normally find out much later the real cause. Those that would have done that with FRE and FNM would have been out around $60 and $40 respectively. Notice we were not buying those laggards here.
Remember all the mean people that told me to load up on the banks back in March. Well, I wonder if any of them are still alive or if they committed suicide recommending me to buy JPM or LEH. Granted it hasn’t been a horrible ride for JPM, YET. But LEH proves that bottom fishing is still a stupid game practiced by those that do not know how to really make money in the stock market. Anyone with a brain knows that YOU NEVER BUY A STOCK trending below the 30 week moving average and you NEVER SHORT a stock trending over the 30 week moving average. If my past big winners in 1999, 2003-2007 did not prove to you that buying stocks while the indexes are in uptrends and to avoid stocks by going into cash when they enter downtrends like they did on October 31, 2007, nothing will ever prove it to you.
Maybe these facts will hit you with some realizations. Comparing 2003 to 2008 lets look at how many stocks have made big gains to now compared to the same time in 2003. In 2003 there were 13 stocks up 1000% by now; this year there is 0. In 2003 there were 92 stocks up 750% by now; this year 0. In 2003 there were 180 stocks up 500%; this year there is 4. In 2003 there were 412 stocks up 200%; this year there is ONLY 12. And the biggest proof we are in a TOTALLY different market is that in 2003 there were 949 stocks (by the way, that still exist on the exchanges after 4 years) up 100% compared to ONLY 50 this year!!! If that doesn’t prove to you the trend of the market is important-NOTHING WILL.
One more burden of proof is that in 2003, the FTD came on volume that was huge and took the price over the 50 and 200 DMA on the Nasdaq. The entire uptrend had the price above the 50 DMA with the 50 DMA above the 200 DMA the WHOLE WAY in 2003 going into its short-term top in 2004. By contrast, in 2008, our indexes have been in severe downtrends with price below the 50 DMA with the 50 DMA below the 200 DMA the entire way.
If this still does not prove that is important to you let’s take a look at China. The whole way in 2006-October 2007 (when China topped too), the indexes price stayed above the 50 DMA with the 50 DMA above the 200 DMA. The few times the 50 DMA did not hold the 200 DMA was there to support the index (but it didn’t need to be as the index immediately ALWAYS took back the 50 DMA). And this year as China is down 65% from the top in October you can see price has been below the 50 DMA with the 50 DMA below the 200 DMA the entire way down.
I am not sure when people will learn to only invest with the trend when it is up and to stay out of stocks when they are moving lower. But I feel it is my calling to try to help all of you from having a -20% portfolio like Cramer has this year. My worst port is down 7% and that is my girlfriends portfolio that was given to me IN OCTOBER (at the TOP!)!! So compare my 7% loss in her account and my overall 10% gain this year (which by my standards is HORRIBLE but compared to Cramer is FANTASTIC) to so many out there that bought FNM, FRE, LEH, BSC, AIG, WM, and stocks like RDN and MBI the whole way down. I think you know who is doing better. That is why my subscribers are killing the crew at realmoney.com which is made up of a lot of horrible “Wall Street bag men.”
Nobody and I mean nobody who subscribes to me is down 20%, if they are using my techniques EXACTLY like I tell them to. So to all of you who do not go with the trend, God bless you. You are going to need the big man upstairs. If you still don’t understand why the trend is so important, you might want to pick up books written by Livermore, Loeb, O’Neil, Weinstein, or Darvas. They will change your life.
I will add more to this on Sunday. But for now ALOOOOOOOOHA!!!! Enjoy the market wrap up video. I know it is hard to see but subscribers get crystal clear Camtasia studio versions. So give us a try, you will NOT be disappointed.
Friday’s Market Wrap:
Gold and Platinum Subscribers Get Full Screen View and Part Two (longs in my scans) and Part Three (shorts in my scans)
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