Today was a clearly bullish session for market participants considering the horrible headline numbers on jobs that came out this morning. Those numbers which saw 533,000 jobs lost in November, including an increase in the number of jobs lost in September and October, helped push the unemployment rate up to 6.7% which was below the consensus 6.8%.
Still the bigger shock is when you combine those three months of job losses and find out that those are the highest numbers (1.3 million lost in 3 months) since World War II. That means that the past three months have been worse than 9/11 when we lost 1.6 million jobs during the recession of 2001. These job losses are clearly stunning.
So how did the market take these numbers? Not well. The indexes fell around 3% following this announcement but in its usual roller-coaster ways, the stock market rebounded erasing all of the losses and ended with the indexes higher across the board anywhere from 3.1% to 4.3%. It was truly a very bullish turnaround, on top of some very bad news.
This turnaround with such bad news has more people calling for a bottom. All I have to say to them if that was the case why do we still have no leaders shaping up? Why are there no new IPOs coming to market? Why did we not have the amount of volume on the indexes like we did in September and October? Why are all of my shorts with gains over 50% still giving me zero full cover signals? Why is the put/call not hitting new highs? Why is the VIX not hitting new highs? Why are there still no nice charts? Why are the indexes still below the 50 day moving average? And why am I not seeing anything in stocks or the market to make me bullish? I will tell you why. I am 99.9% sure this is not a bottom.
There is only one leading group and that is the education stocks. Education stocks historically lead in bear markets. I know, I was there in 2000-2002 the last time these stocks led. What is another group that leads with crazy charts in a bear market? Small cap thin bank stocks. Those are also holding well and leading. This completely tells me that there is no way that we can have a bottom with these leaders.
Others sentiment indicators include the put/call ratio which hasn't touched the highs seen in March 2008, the VIX not getting over that October intraday high, the investors intelligence survey still does not have a new record number of bears and new record low in bulls. When I see these three sentiment indicators line up, then I will start to believe there is a bottom. But still the market and leading stocks have to confirm the three sentiment indicators.
Another thing that is very important is to just listen to people. I still have people coming up to me asking me "are stocks cheap to buy here?" As long as these neophytes to the stock market continue to ask me for stock advice like now is a good time to buy or something, there is no way I can see the right amount of fear in the public that is needed for a bottom.
People are supposed to be very pessimistic, like they were before the election on November 4th. They were pessimistic then, but the sentiment indicators and leading stocks did not come. Now that the sentiment indicators are getting close to extreme levels, we now have a flock of people that were initially bullish about their future finances following the election. This bullish attitude does not allow the proper fear to set in that must set in to mark a bottom.
My opinion is that since we have lost 50% in the market already, people have seen their portfolios destroyed, and yet they still want to buy GE, GM, or F because it is cheap means that we have a long time to go.
The good news about this for us that are short is that we probably will end up with some 85% to 95% gains before we fully cover our shorts. The other good news is this allows you RIGHT NOW, if you can, to save money to have more money available to use in the next bull market. Those fresh bull markets, THAT I NEVER MISS thanks to proper follow-through day analysis, is where you find the stocks that can move 300% to 3,000% in 12 months or less. If you have your head in the sand or are out doing something else because the market "was too depressing" or "it was too hard," you can be sure that when the turn comes like it did in 2002 to early 2003, you will miss the next SINA SOHU NTES and TASR not to mention SIGM HIL EPIC EVOL USNA SSYS FMDAY EGHT and so many other big winners that are always there after a bear.
The bad news for people like me that make our living off of profits in the stock market is that we may have to thank God that we saved some money during the good times so that we can survive the bad times. As long as the bad times is in a nice calm downtrend with small low volume rallies it is never hard to make money in a bear like you can make money in a bull. However, when 50% moves happen in days and you only get one chance to get short when you used to get two to three times to get short a good setup. The no uptick rule has helped us make money fast when we are right but at the same time it has unfortunately left us in a position where we must get in fast or miss it and not get in at all. Stocks like RIMM, AAPL, and GRMN are all great examples. Every one of these shorts have given me over 50% gains. However, I wanted to load up on IBD's top past big winners, on the short side, when that time came. Well it came, but it came too fast in late 2007 and now in the June to now period in 2008 they have setup too fast and failed too quickly again.
Lately, neither longs or shorts have been doing well, still that is OK because investors that use the CANSLIM methodology know and understand right now that the SMARTEST investors are either fully in cash or have a mixture of short positions and cash. Some might have a few longs but in this bear market, besides personal winners like QCOR and ANCI, there are not any stocks that exist to make you money. That is why over the past 12 months you can not find one growth mutual fund with positive returns. And if you are calling that arbitrage fund of Gabelli a growth fund, please stop. The next fund on the list is the top growth fund. This means, right now, the best growth mutual fund is down 30%. So much for going long the few strong stocks in a bull market.
I think the returns from hedge funds, mutual funds, pension funds, and TV "superstars" like Cramer prove that buying "value" stocks, "averaging down," and "bargain hunting" are all metaphors for LOSING MONEY. The best hedge funds are down 40% this year, the best mutual funds are down 30% this year, and Cramer is down 45% this year. I was given an account in November with 4x1 margin and it is now down 11% (new long is holding but not moving up). Without margin that is a 3% loss. My accounts are down 11%, down 5%, up 9%, up 12%, and up 25%. Combined the gains are around a 15% gain compared to a market down almost 55% at one point this year. I am up 15% and Cramer is down 45%. Why are you watching him again?
Seriously, everyone, the best Christmas present you can get yourself isn't even a subscription to my website so you can make serious money. The best Christmas present you could give anyone this year to change their life forever would be a subscription to eInvestorsBusinessDaily (eIBD). If you want to learn how to save all your money in a bear market and return some amazing gains in a bull market without ever having to worry about another sleepless night again, IBD is the cure to your ails.
I can't stress this enough. Without the rules CANSLIM has taught me, I am sure 2000-2002 and 2008 would have completed their assault in knocking me out of the market. Instead armed with the knowledge of nearly 14 years experience in the market and Investors Business Daily you can be sure I will NEVER EVER EVER be knocked out of the stock market. Only a horrible medical accident will ever end this truth telling blog.
If you can not afford IBD, this site, or Telechart, due to a MAJOR loss in the stock or real estate market, you should at LEAST prepare yourself for the future by buying the books that are on my reading list on this site. Also make sure you study every single one of the Past Big Winners of my longs and shorts on the .com site and go to the IBD Learning center and learn EVERYTHING that is on that learning center. Go over it, over and over, until it is like breathing.
It was a bullish week but the lack of volume completely kills any and all buzz that was received off this rally. A rally built on low volume is like a house built on sand. It looks nice RIGHT NOW but once a real storm comes the foundation will crumble. Be careful out there, realize that shorts and longs being taken now are not working real well, and that means only one thing: CASH IS KING S T I L L !!!!!!!!
I can't wait to get fully margined long again, however, the charts have to setup with those beautiful patterns that I have been used to my entire investing life. Until those charts reappear cash is going to be my best friend. That is unless a perfect short setup comes along. Then, with this market still in a very clear downtrend on the long-term, intermediate term, and sub-intermediate term, I would be more than happy to catch more short moves before the bull starts again.
Stock Market Wrap Up part one and part two full size available for Gold/Platinum members in Gold Forums. Silver/Free Stock Market Wrap Up part one small youtube edition:
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