Wednesday, December 10, 2008

Stock Indexes Pause At The 50 Day Moving Average; Another Long Bites The Dust Indicating This Isn't A Bottom Yet

I normally find low volume days productive in a market. However, today has thrown me a monkey wrench in that thought process as my short scans had more stocks in them than my long scans. That tells me that despite today's gains, the market was quite weak underneath.

One of the biggest tells to me that something is still wrong is the fact that NONE of my shorts from May-September have given me full cover signals via a huge volume move above the 50 DMA or a move above the 200 DMA. This fact alone should have everyone questioning EVERYONE that is calling this a bottom.

The other clear problem is coming from the recent few longs that have actually setup in nice patterns. Yesterday I had to fully cut one for not moving higher immediately and now another stock today has failed by gapping lower to the downside on very strong volume. That makes 2 longs down out of 5 in two days. Now I only have three stocks and two of those are still longs from BEFORE the selloff started. So, since October 1st, I have gone long 8 stocks and ONLY ONE IS STILL WORKING. The other seven have hit me with cut losses.

I hope this proves to everyone that going long in a bear market, EVEN LEADING STOCKS, is a dangerous proposition. That is why I have continued to say ALL YEAR LONG that CASH IS KING. This is exactly why. Longs are not working, unless you are flipping them over in a few days. Unless you are flipping them which will cost you in the long run when a real bull market starts, you are probably suffering ugly losses.

Those ugly losses can be seen in funds run by smart people that have blown up their previous results. I read a WSJ piece on Bill Miller today that SHOCKED ME to the core. I had no clue he blew up his fund 58% this year. Do you see why cutting your losses is important? Or how about Calamos Growth fund that used to be AT THE TOP of the list for growth mutual fund performance since 1994. It has gone from a permanent spot at the top the past five years or so to NOT EVEN BEING ON THE LIST OF 20. Amazing stuff and a testament to the power of cutting losses.

There is not much more to say that I have not gone over the past few sessions, as we continue to dance right below the 50 day moving average. I know I have said that I believe the indexes will break above them but with two out of five longs giving me full cut loss signals and zero big-winning-shorts giving me full cover signals I have to throw up serious doubts about that guess now. So please do not get fully margined to the long side here. You could suffer the wrath that so many mutual funds have suffered this year.

There is one key reason I will be around FOREVER: I CUT ALL MY LOSSES. I NEVER LET LOSSES RUN. The other key traits that will keep me around forever is that I love beautiful green charts and making a lot of money in them, I love researching for future big winners, and I NEVER GIVE UP! NEVER!! I never ever quit. No matter how long this bear last, when it ends, I WILL BE THERE. No doubt. :)

I want to apologize to everyone about the chat room today. Chatblazer lost its server today and according to records is the FIRST problem since August 6. So if we can only have one problem every quarter, I will be more than happy with that. Still I do apologize and I was around the Gold Forums the entire last hour of the session (after running important errands) and have been on since. So if the chat room is still down, just go to the Gold Forums and you can find me there. I do apologize for this. I wish technology was perfect but there will always be problems. Chat Blazer is the best software for all the different operating systems out there but they still have work to do to be a PERFECT chat hosting software. They are getting much better as once a quarter is much better than what it used to be during the early days of Chat Blazer.

Aloha everyone, stay positive, keep that cash level high, and remember being short is the only way to make big money right now (unless you are long ultrashort ETFs). I will see everyone tomorrow in the chat room and if you need to ask questions now you can go to the Gold Forums and post your questions there. It's almost Friday already...THANK GOD IN HEAVEN!

Part one and two full size videos available on the Gold Forums. Part one youtube version will be available when we get it posted on youtube:

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