Wednesday, December 17, 2008

Stocks Hang Around In A Tight Trading Range Consolidating The Gains Of Yesterday On Lower Volume

Today was a pretty boring session for those that stare at their computer screens all day as major stock indexes stayed in a tight volatile range as most pulled back around 1% on lower volume. This was taken to mean two different things for two different class of traders.

The bulls championed today's action because they were able to hold onto the gains after retaking the 50 day moving average. However, on the other end, I heard bears say that the inability of the market to rally further on the gains shows lack of confidence and confirmation on yesterday's gains.

I on the other hand have no opinion and take the market for what it was today. A tight ranged inside day (basically an inside day. A few indexes went a little outside yesterday's price range) on lower volume. It was neither bullish or bearish. It just was what it was.

Now, there was one thing that happened today that has not happened yet during this entire downtrend. While many people tried to play super-hero by calling bottoms in September and October, I stayed with the downtrend and thus made good money on some very solid shorts. Since then the market has gone range bound from 10/15 to 12/17 on the SP 500 with that index falling just .38%. That tight movement the past two weeks has made it hard to take new longs or new shorts.

That is why I have continued to recommend to my subscribers that they keep new longs or shorts small until a clear trend is evidenced via higher volume and a break higher above this two month range or a break lower from the same range. Either way, going short or long is fine with me, as long as we can make some money.

Some of the best money to be made has come via ETFs and if any of you have been trading my ETF recommendations I guess all I can say is congratulations. Once again, another ETF has moved 50% in my favor and yet I don't have a position because I don't fell comfortable holding ETFs. This might be a game that I definitely need to get involved because I have done very well on the long and short side with my ETF calls and would have probably doubled my return this year by playing the 2x and 3x ETFs that I must ethically say is helping to ruin this great market. Even though some big gains can be had by them they are still not healthy for the market. Like so many other things.

There are two groups that are clearly leading and I am long two leading stocks in each sector so if you are looking to go long I am long two leading stocks in the two leading industries that should produce some good gains if we can get this LOW volume Santa Clause rally going.

Now, while I would LOVE for this bear market bounce to turn into a bull market, everything in my analysis of technical analysis tells me that it would be foolish to be a raging bull here. There are a couple of easy to use technical signals that will help keep you in an uptrend for the majority of it and visa versa for downtrends. Right now, at the level of the moving averages, MACD lines, and RSI lines, it appears to me we are far away from a bottom.

The other clear red flag to me that keeps popping up is the lack of accumulation on the rallies in the indexes the past few weeks. Not only that the few leaders that setup and broke out before this rally got moving came crashing back to the earth in a very violent manner.

While it is very good to see stocks setting up in possible future long positions and nice to have three new longs this week in a week where I did not think we would find anything to go long as a low volume holiday rally usually doesn't allow us to get long too many great big winners. It was still nice to get some stocks and then have them hold after some of the recent horrible situations we have been in after a nice stock sets up.

If this market was really ready to run not only would the stocks I am going long now hold up but the stocks that were very pretty that I went long earlier would still be in my holdings. Instead stocks like DMND, ISYS, AXYS, and ASEI have signaled to me to get fully out and on three of them that has definitely been the right decision as lower prices continue to smack these stocks. Now if the recent longs I just took throw me for a loop you can guarantee I will get even more strict on my purchases.

Before I used to take a nice price move off the 50 day moving average or a breakout with a volume surge as long as it had green BOP. I don't do that anymore. From now on price and volume has to surge with BOP either going green from yellow or a higher green from a lower green. Basically I need to see strength before I even go long a stock right now as we do not have a market rising on strong volume.

Now, remember that one thing I was talking about, before I went on my long tangent? Well that one thing that has happened that has not happened since the September downtrend. And that is one of my long-term shorts has given me a full cover signal. This is the first time since the major downtrend started in September that one of those big winners had to be fully covered. The last is being covered with a 35% gain after peaking with a 53% gain in two months. Not bad for two months on the short side in a VERY UGLY market.

Don't forget that I am running a Holiday Special for everyone. I know it says it is for 25% off one month but if you want to buy an annual subscription for the price of 11 months we will also give you the 25% deal. I was not aware that they only authorized a month but I am willing to give a full year for 25% off 11 months. Trust me you will make more money here than anywhere else when it comes to the stock market. And if you invest in futures or ETFs, you can use my recommendations to make a lot of money. I said to buy Gold in 2002, to short the Dollar in 2001, to buy Gold and Silver a week ago, and I recently gave a short recommendation on SRS multiple times that have resulted in gains for subscribers from 35% to 50% in UNDER A MONTH.

Remember, those Past Big Winners under my Longs section will come back again. Heck, recently we had one setup and produce a 124% gain. Too bad it was on the OTCBB market with that perfect chart. And looking at the price, volume, and BOP of that one and FRPT of 2006 I wonder why TCNet doesn't open its software to the OTCBB market. There are some gems on there that setup and breakout before being listed on the Nassy, NYSE, or AMEX exchanges. I really wish TCNet would give us access to that market. It is obvious the price, volume, and BOP that I look for in my best longs (and we will see these setups again LEFT AND RIGHT in the next bull market!!!; DGLY, PDO, and ANCI all setup this year) show up on the OTCBB too.

Imagine if we had access to that. That would have been a 325% gain in 2006 on FRPT's near-perfect chart and a 125% gain in six months on AIPC's near-perfect chart this year. Come on TCNet. Let's open the system up to other markets. ESPECIALLY China! :)

Have a great Thursday and I will see you in the chat room and forums.

Stock Market Wrap Up Part One and Two full size version available on the Gold Forums. Free YouTube small version will be posted below:

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