Sunday, November 09, 2008

It Will Not Be A Bear Market Forever But Right Now It Is And That Means Caution

Friday saw the indexes produce some nice gains that were still puny in comparison to the two-day carnage that led to the bounce. The other bad news concerning the bounce is that volume was much smaller than the previous two days. That indicates that big mutual funds are not interested in accumulating stocks at these levels. And if I were a smart man I would want to do what they are doing and if they are not accumulating stocks then I do not want to be buying stocks at these levels.

Even though I still hear some horrible bottom-fishing advice I must warn you with 100% caution on playing that game. Bottom fishing stocks when there are absolutely no leading sectors with a market mired in a vicious downtrend below both the 50 and 200 day moving averages is suicide. The best bet is to stay on the side and in cash, unless you have the wherewithal to short stocks. There are still a lot of stocks that are around their 52-week highs and eventually they will have to crack to, if we do not get a rally any time soon.

I don't see that happening because I don't have any leading stocks showing up in my scans telling me that the coast is soon to be clear. The good news is that my price-and-volume scans are starting to produce a few more stocks but when the scans produce between 10-20 compared to 100-200 during a bull market, you can obviously tell that we are still not in the right environment for going long stocks.

If there is any area that can be considered relatively safer than others it would be the small-cap regional banks and definitely the medical stocks. I have listed quite a bit of these medical and small bank stocks in the Silver and Gold Forums so that I may show everyone the few stocks that do look good and very well could be future longs. However, to become future longs, they will need to work on longer bases or build another base on top of the current base. Right now, most of these charts are a bit too choppy to pass all my criteria that I demand in my longs.

The good news is that this too shall pass. We came back from the 1930s, 1970s, and I am sure the insanity that is about to happen to this economy will eventually be cycled out with YOY numbers and soon we will have another uptrend to deal with. That is the good news.

The bad news is that for right now, unless you are going short or heavily cash, your portfolio probably has a lot more pain coming to it with unemployment hitting 6.4% and jobless claims touching 10 million. This is something that should take a while to play through the system but eventually if cooler and smarter heads prevail things should be moving higher again.

I will remind you one more time, we came back from the '30s and '70s. I am sure we can come back from the 2007-2009 downtrend with a few powerful longs eventually. The only problem right now is that there is no leadership. By just looking at the top of the new highs column it becomes very evident that nothing is moving higher. That my friends is different than any other bear market I have seen. Every bear market I have ever seen has had at least a few pockets of strength. This rally we don't have any but medical and even that isn't safe.

Since there is not much new to add to the analysis as long as we are in this downtrend that I have been correct about since the March rally fizzled and the top in October 2007 when I said to sell all mutual funds purchased in 03-06 bull, I suggest to take this time studying my Past Big Winners in the longs area so that you know exactly what to look for when people give up on this market.

Remember, when this market turns, I WILL STILL BE HERE, and I will have at least a few "hot" charts that will give perfect buy signals. There will be another bull market. It might not be a huge long term bull market but I don't need that. All I need is a strong uptrend or downtrend to make money in. If you are not aware of some of my top longs and (shorts) let me list a few here: ANCI 73% QCOR 37% (CETV 71% AAPL 39% CEDC 45% AMX 44% SPG 24% ARB 35% APD 41% ATHR 35% TITN 48% SBAC 44% GGB 61% OKE 34% POT 50% CYT 54% MOS 60% RIMM 51% CEO 45% SPW 67% CAJ 27%). All of these longs and shorts have been taken AFTER March. So as you can see even in this very difficult market I have no problem producing gains.

Heck, I will go even this far, if you are a newbie and you ONLY have a 15% loss this year, give yourself a big pat on the back. You are crushing the market and have more funds available for the next bull market! Remember, you must always beat the market, year in and year out. Even if you lose a little money, as long as you are beating the big losses of the market, YOU ARE WINNING! Remember, stay positive, vigilant, and keep those watchlist updated. Soon this too shall pass and another bull market will be back.

Daily Market Wrap Video is available on the Gold forums for Gold and Platinum members. Part two is also available.

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