Wednesday, November 26, 2008

Stocks Put In A Very Bullish Session Across The Board With One Big Problem: No Volume

Stocks put in a very impressive drive higher as another round of short-squeezing hit investors who were a little too heavily short coming into today. The reason why I would call this another short-squeeze rally is that, once again, volume has fallen on a day where the market rallies an extreme amount.

If you are playing the indexes on an intraday or very short term basis, the volume is not important and all you will need to focus on is the price action. Then you either move with the trend and/or use support and resistance on price charts to implement your methodology. However, when it comes to wanting to build stock/option positions over a period of time and reap the huge rewards that come to those who invest with those, you need to see volume expand on the rallies and retreat on the pullbacks before you can feel confident to go all-in long with full margin.

Until we find volume showing up on the rallies on the indexes, with pullbacks showing lower volume, and then while that happens see leading stocks at the top of the industry group list leading with the individual leading stocks in those sectors setting up and/or breaking out, there is no reason for active-investors who have a track record of making money on the long side in bull markets to go long.

Only once our setups come again (which a few are STARTING to show up) and then fulfill their basing period to launch off that springboard, will it be okay with me to tell you to start loading up your portfolio and watchlist with the best looking stocks.

However, this scenario does not appear to be happening off this low volume rally attempt off the lows. While it could lead to a possible higher high that could then help all of these stocks go from choppy and volatile patterns to nice and round pattern, the majority of stocks are still in very heavy downtrends.

Even banks that have been bailed out are bouncing on mediocre volume and even though BOP is turning green ultimately these stocks have to see massive financial investments by big money managers before they will finally settle and start to build higher highs. But not only are the banks very important to bottom before we can look for a rally but tech stocks must try to work on building bottoms before I can turn bullish. Why? technology is what brings us our most innovative companies.

However, the truth is, not until these stocks AND LEADING STOCKS at the top of the industry group list are rallying hard on the up days and either not losing money or gaining a little on down days, we just will not have a market that is going to be a long-term uptrend. A bear market rally can make us a lot of money. Go study my Past Big Winners from 2000-2002 to prove that even in a bear market, as long as it doesn't turn into a market like the 1930s and now, will always have a few stocks that make us big money.

While we didn't have any this downtrend, we did have DGLY and PDO that did fairly well from April to June. Since then, there has been NOTHING. I have never seen that before. The good news for me mentally, to prepare myself for this year, was last year. For the first time since late 2002, I started to have more "near-perfect" to "perfect" (only stocks like the one that starts with A and the one that starts with C are potential future candidates) stocks fail instead of rally. From 2002-early 2007, when a stock would setup in a pattern like HRZ, AFSI, or any of the others I posted, they would start to work and then fail. This was something I was not used to and scared me that my style was "known."

The great news is APPY, DGLY, and PDO ended up setting up in these near-perfect to perfect patterns after so many of the other failures and these ended up working anywhere from 60% to 100% to 350%. So as you can see even if I am 50% (which is only that bad in bear markets and the end of bull markets), if you have a 50% gain, 10% loss, 100% gain, 7% loss, 350% gain, and then 10% loss in your six picks in a bull market, you have just made a LOT of money. Do this consistently in a bull market and you will have no problem getting wealthy.

But for now we have to continue to wait for something to setup and breakout correctly before we close all of our shorts, stop going short, consider buying gold, consider selling the dollar short, and/or staying in cash. Only once I get a real Follow-Through Day in the stock market with leading stocks in leading sectors and BEAUTIFUL chart patterns like those that showed up in 99 and 03 will I even consider going long. For now the right side is the short side on the overall big trend. The very short term trader was smart to play the rally this week that I completely expected to happen since Thursday/Friday of last week. However, I didn't think the day before Thanksgiving would be such a huge day of gains. The good news is that some recent shorts are still setup for possible big gains. I sure would hate to see a short term rally kill some great potential short setups that just setup. There was a lot of downside potential.

However, you can guarantee I will be more than happy to take losses or less gains on my new shorts just to have a bull market where I could go heavily long again. I am ready to make my huge gains on the long side. However, at the same time, I love making a little bit of money and saving all of my money for those future moments when I can go fully long stocks like TASR, TZOO, SINA, SOHU, and NTES. Even if they are the HIL, EPIC, EGHT, USNA, SSYS, or FMDAY setups, I will be more than happy and very wealthy after seeing these patterns again. Pray that we do. I really hope the long side isn't dead for a long time. I love those gains and as you can see via the Past Big Winners it is obvious that being long is a lot more fun and pretty than being short. Even when you make money on the short side, you still don't feel good. Because you know so many financially foolish people are not only not short (because they do not even know what that means) but they are still almost fully long either mutual funds or stocks that they are getting matching contributions from in their 401k.

I tell you what, I sure would like to help everyone out and tell you that it is time to go long beautiful charts and CANSLIM stocks for some huge gains. But we are still far away from that and I will continue to make you as much money as possible in this market that is very hard for stock pickers to make money in. Even ETFs are not easy. There are only a FEW that can handle the short term movements of these instruments. STUDY ALL OF MY PAST BIG WINNERS IN THE RAGING BULL MARKETS and then the rest in the other markets. If you do this I hope you understand that messing with ETFs in a bull market will cost you a LOT of money. In bear markets, I can understand using 2x to 3x inverse short ETFs in your IRA to make money but unless you are nailing them and are fully confident investing like this, going short my shorts of past leading stocks breaking down has been proven HISTORICALLY since Livermore's time and even before that that is the best way to create wealth in a bear market. I don't think Livermore would have traded ETFs. :)

I just want to wish every a very HAPPY THANKSGIVING. I love everyone of you that read these daily market wrap ups. I also want to let you all know that Seeking Alpha has let me know it is good to start contributing articles and the more the better. So I plan on trying to write one to two a day. If they don't get published there, by chance, I will post them on other sites, so that everyone can read them. I will start this weekend with my Seeking Alpha post and I will also post 3-5 past shorts that made big gains in 07-08 and will show one short from 2000-2002. I will add many others from other downtrend periods to show you how to make money going short. But I will start slow and add when I have time to the Past Big Winners Shorts area.

This site takes over 6-12 hours to take care of on the Platinum, Gold, Silver, and Free side so I already work really hard. My own personal managing of my trading accounts take around 30 minutes to 2 hours depending on the market, so time as you can see is very hard to come by. But I'll find it someway. I am very thankful that I have a hard work ethic. Hopefully, I am saving you from the WS lies and at the same time making you a LOT of money. That is something you all are hopefully VERY THANKFUL for. Happy Thanksgiving!!! God bless!!!! and I will see you on Friday. :)

Part one and part two full size versions available on the Gold Forums, including a 35 minute part three from yesterday in .wmv format. You will need to download it to your computer or open it up to play it. Some have no problem going directly to the link but for others I provided the link to the .wmv file. Free part one small version available shortly:

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