Thursday, December 18, 2008

Major Market Indexes Continue To Struggle Around The 50 Day Moving Averages On Mixed Volume

Today was a bearish and dull session that saw stocks fail to take advantage of the recent takeover of the 50 day moving average. The fact that stocks can't really mount much of an advance after getting above this crucial line indicates to me that the market might not be ready to turn into an intermediate trend uptrend.

Instead it appears the trading range the market has been in the past two months will continue to trod along until the market actually decides to make a decision one way or the other from the 50 day moving average.

When we look at individual stocks in our scans and look at leading industries we can see that the market is not real healthy and while some education, small banks, medical, and metal related stocks are doing well recently the fact remains that this market has a lot of resistance to deal with and will probably be tough to deal with in the short-term.

This is why I must caution everyone from calling a bottom. If we had a volume, we HONESTLY would have some high quality fundamentally strong stocks setting up in beautiful green bases on my charting software. The fact that my scans continue to be completely void of any high quality stock with nice charts and that my long-term shorts continue to work perfectly and not give me full cover signals is a clear signal that the downside is not fully in check yet.

Even more proof of this is that I had a short that was taken in September that gave me a full cover signal yesterday. However, today, it re-reverses on even higher volume and now is back to being a clear short. So in other words I covered a short that gave me a full cover signal and now it is back to being a clear short again. So the fact that even when the first full cover signal on a long-term short was given it still did not lead to the stock rising. Instead today it was back to selling off on higher volume. Do I regret covering all of it now? YES! Still another 35 shorts tell me that I am in good position.

We did have a new long yesterday and it did produce for us a gain over 5% today but this is a leading stock in a leading industry. The airlines and education stocks have two clear leaders in those two groups and I am happily long both. However, if they decide to rollover, I will not wait and ask questions. I will instead act and get out of the leading stocks in the leading industry groups. So far they are holding in there with gains but anything is possible in this market.

The fact is that on the short-term the trend is up, the sub-intermediate term is sideways, the intermediate term is down, and the long term trend is definitely very down. For those that do not fully grasp the severity of this downturn I want you to realize that we have fallen harder and faster than even the great depression. I guess we will see if we lose 90% like that market did. The way the data looks it sure would not surprise me.

Luckily, I never have to worry about guessing which way the market will go as I have learned to use a combination of fundamentals and technicals to know if I should be bullish or bearish. Right now, the charts say to stay bearish and a few charts hint that they want to rally but not really. The fact these charts are not super bullish and working right away on huge accumulation is a big red flag.

This market is definitely not out of the water and today was a very dull day with the lack of any follow-through to the recent gains. I have to stress this over and over, ONCE AGAIN, cash is king! There will be a time to get very long on full margin when those beautiful charts like AIPC (from June to now) start showing up everywhere. But until then, you can be sure the safest and surest play, unless you are a daytrading this volatile market, is to be heavily long cash. If you can't stand being patient and have to play the market, you can go to my Gold forums and play my ETF recommendations.

Just because I do not take my long/short recommendations in ETFs doesn't mean you shouldn't either. i would actually be having a much better year had I followed my own ETF recommendations. I am sure if beautiful charts don't show up any time soon, and new shorts do not build proper setups, that I will soon be going long/short ETFs.

All I have to say is Thank GOD for CANSLIM. The money made in 1999, 2003-2007 by being long the strongest stocks in the strongest sectors has allowed me to stay patiently in cash this year as we wait for the best short/long setups to setup. The only regret I have is that I did not load up on my shorts like RIMM, AAPL, and a few other key stocks that are now up over 65%+ when they setup in their very bearish patterns. I really thought we would have more time and better setups to short. However, this market fell apart so fast there was nothing I could do.

Stay positive, continue to stay VERY DISCIPLINED, and remember this too shall pass. Part one and part two of my stock market wrap up videos are available on the Gold forums in full size. Part one free Youtube version will be ready as soon as my video technician has it up! Have a great day/night! Aloha!

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