Sunday, October 05, 2008

Another Selloff Comes With Much Higher Volume On The Nasdaq; Futures Are Not Looking Good For Monday

October 5, 2008

Stocks got hit again on Friday with the DJIA and Nasdaq losing 1.5%. However, the damage was more evident in the Nasdaq due to the higher volume than the day before and a higher amount of stocks hitting new 52-week lows.

Some people are getting very bearish out there, and while they have very good reasons to be very bearish, it would be a horrible decision to decide to go short here. As silly it would be to decide you are going to go long right here. Right now, the market is clearly in a downtrend and that is the problem. It is CLEARLY in a downtrend. That means that it is now evident to everyone that stocks are falling so there is a higher probability of a bounce/relief rally coming sometime in the near future after prices fall a bit.

I am not a bull in this tape and if you watch the video you will see/hear the criteria that I must see in the overall indexes along with what I like the charts to look like. If we look at all the “big winners” from this last bull market, we can see that some breakdowns on long-term charts look like they are JUST BEGINNING. Therefore, I will continue to hold 1/2 my short positions in all the past leaders that have given me anywhere from 25% to 50% returns in just a month or two months. Folks if you get big gains that quickly on the short side in a bear market, you should not get greedy and try to hold out for the full 99.99% gain. Instead you need to take gains along the way because in EVERY BEAR MARKET there are a LOT of short-covering rallies that will cause major pain for those that chased stocks lower and decided to raid the cookie jar after everyone has already taken all the cookies.

If you are a subscriber you have seen me now operate the long side of the market and now the short side of the market. It should be clear that, by now, hopefully, I know what I am talking about. I only do this to make you a better trader and I will always stress that THE MOST IMPORTANT of all decisions to make about investing comes to cutting losses. I do not care what Cramer tells everyone on TV, the facts PROVE THAT YOU SHOULD NEVER AVERAGE DOWN as the best stocks year in and year out have proven that they don’t come from major downtrends. Instead they come from previous uptrends and then a sound base. After a proper base and the market conditions are correct those stocks go up anywhere from 100% to 90,000% like CSCO from 1990 to 2000. You simply can not make huge gains on the long side and huge gains on the short side (or be long a LOT OF CASH!! like I have been saying almost EVERY DAY for the past two months BEFORE THE BREAKDOWN AND AFTER TELLING YOU THE MARKET TOPPED IN OCTOBER/NOVEMBER) using Cramer’s methodology. That is why his Action Alert column is down 27% this year, while the worst account I run is down 7%. I cut my losses and go to 100% cash in bear markets in family/friends account.

However, for my account, as via witnessed by my subscribers, I am up almost 20% this year in my main account. This is because I have been long a few stocks that turned out to be big winners from beautiful charts. Along with being long those couple of stocks this year, the biggest portion of the 18% gain came last week when most people were losing almost 20% in one week. My account went from up 10% to up 18%. That came with me 80% to 90% cash. How did that happen then? I am short (I have covered around half of everything. The rest I am riding lower) POT MOS AAPL CETV RIMM along with others in that 20% of working capital.

So, once again, I have proven that a form of CANSLIM in bull markets (view my Past Big Winners Longs FOR FREE at my .com site) and reversed for bear markets (as subscribers have seen the past 11 months) is much healthier for YOUR account than watching Cramer on TV. Sometimes I wonder who is that person really who is calling in to his show for “stock market information.” I mean his AA portfolio is down 27% this year. So why are so many people buying stocks on the way down? I guess I will never know. I just hope a couple of people reading this who have lost a lot of money this year think about what they could do differently and maybe they will realize that buying stocks on the way down or shorting stocks on the way up is NOT the way to invest in the stock market. That method might work in the MOST BULLEST of bull markets but in a market like THIS NOW, there is no way you can buy stocks on the way down and expect to make money.

Instead try to learn CANSLIM and hopefully the FACTS will convince you to go long stocks only in a bull market and go short stocks that are setting up and breaking down after a big run-up (any stock with over a 100% gain in the previous bull market; I prefer stocks up 1000% or more from the low to the high) in a bear market. CANSLIM investors that understand this methodology were either in cash, short, or they were short and in cash. I held more cash this time than I did at the start of the last bear market but if this is going to last a while there will be many false rallies that lead to good short setups. However, keep in mind now that we are already 11 months into a bear market it could be dangerous to go short a lot of stock here. So don’t look for stocks already down 50% plus. I have gone short those and taken 1/2 my gains in them. Look for the stocks that are just now starting to crack. But first, remember, make sure it is up at least 100% from the start of the bull market in October 2002 to the end in October 2007.

There is not much else to say except that I should have been 100% short but seriously that would be way too risky. I am content staying 70% to 90% cash while the market is in a downtrend. When this bear market is over and the market is ready to move higher again, you can be sure that I will be ready to go long every stock that looks like LPHI (with max green BOP still).

LPHI is not a buy right now as it is setting up in a base. But a high volume breakout with BOP going back to max green BOP sure would make it a good possible long in this bear market. Its industry group is #1 out of 197 industry groups based on six month price performance. So there are a lot of great things going for it. However, you can be patient and wait for the market to be moving higher before going long.

Why? Because there will be 10-30 stocks that look like LPHI but they will have max green BOP the whole way down, they will have more average daily volume, and they will be of higher quality stocks. If you don’t know what a high quality stock is then you must start learning CANSLIM. The first step you could take to make a big difference in your trading is to NEVER buy a stock trading UNDER $10, even with the market in an uptrend with the market’s price above the 50 day moving average with the 50 day moving average over the 200 day moving average. You get what you pay for in the stock market. Rather you want to believe that or not it is the truth. Another thing to NEVER buy is a stock that went from $10 to $100 and went back to $10. NEVER BUY A STOCK THAT ROUNDTRIPS. EVER!

OK, I have done my duty to help those that have lost a lot of money the past week. There is nothing else I can say. Make sure to watch the YouTube videos if you have time (the 10/03 YouTube will be up before the opening bell). This will help you visualize what I am talking about much better. ALOOOOHA!!!!

Market Wrap Video is now available on the forums for Gold and Platinum Subscribers.

Saturday, October 04, 2008

After Surviving A Maui Wedding I Have To Watch This Crap; Stocks Selloff As Volume Picks Up As "Rescue" Package Passes The Senate

Congratulations to everyone who went short POT and MOS with me. We now have gains of 43% and 51% respectively. It is time to take some profits, obviously. However, our holding period was not even one month and those kind of gains compounded and annualized our the kind of returns that you can get at BWT. Just wait till the next bull market starts. If you think my money will be in a mattress and my head will be in the sand, you are greatly mistaken.

By the way I want to remind everyone of all the hate remarks I received in March when I told you the banks had not bottomed. I was attacked pretty hard on the comments. Those same people must feel pretty foolish now. That is if they have any integrity. But for those short any of the 22 stocks I have taken short since June you now have around 25%-50% gains in a market where many people are down 20% plus. For those of you still not a subscriber to my site, what in the heck our you waiting for! For me to rise prices? How can I constantly be this right and have these kind of returns and justify the prices I charge!!! I am short AAPL, RIMM, POT, MOS and in under one month the lowest one is up 37%. Not to mention I told my subscibers to sell their mutual funds in NOVEMBER 2007 AT THE TOP!!! I have preached cash for newbies since then and when we finally stopped flopping around I issued shorts in many stocks now down a ton.

Why keep losing money at the sites that you subscribe to. Step up before I raise prices. Because come next bull market when I pick the next 100%, 300%, 500%, 1000%, and some 2000% winners I dont want a TON of people following me into my trades. I only want the most dedicated believers into this system. So stop losing money and telling me in emails about your horror stories, if you are not a subscriber. There is NOT ONE Platinum or Gold member that was long this year besides the few months we did have a chance to exploit the market and I made HUGE gains in stocks like PDO and DGLY. Besides that, for free, in this commentary I have preached cash and in the past month finally started to exploit shorts as they rolled over. Now the money that I have on the line has made me VERY HAPPY and produced wonderful returns. Not only that, the worst account I have, was given to me on November 02, 2007 and is ONLY down 7% compared to the 30% drop in the market. So when we do lose money here, we NEVER lose a lot. This is why you must always cut losses. This market sucks and I have said plenty that everyone that reads this should have been in cash. Tonight I will just promote my services. ran a 24 hour special for $99 for a year. Why do you think that was? You get what you pay for in life. You want to make the big money when this market turns around then you will be a BWT subscriber. If you do not want to make a lot of money then you will waste your time reading "free" market commentary. Enjoy the mediocre results and to all of those who were mean to me when they "swore the banks bottomed in March," you get what you deserve.

I say NO to a bailout. Let these companies fall on their own and let the greedy lenders and people that took out these loans pay for THEIR mistakes. I am sick of making wise financial decisions and NEVER being rewarded. Yet I see people F up all around me and get bailed out. I am sick of it, as a tax payer.

Gold and Platinum subscribers get full size version and part 2 and/or part 3.

Nice Bounce But Too Bad It Was On Lower Volume; Bulls Show No Conviction In Buying As Volume Comes In Lower Across The Board

We are living in the middle of a breakdown of the markets due to corrupt lending practices with greedy executives and uninformed people getting involved in business they never should have. This is never good for stocks and I don't care what anyone says. Shooting down that bill was the right idea. Let wall street battle it out. They screwed up and the tax payers should not be bailed out. At the same time capping CEO pay at $500,000 for running a bank is psychotic and shows NOTHING of a FREE market system.

However, I must admit the system is/was broken. When I left NYC in 2000 I knew there was more than what the .com bubble had. But I had no clue that it would ever get like this in real estate. I used to date a real estate broker in Maui and I used to tell her that this was going to end up destroying the economy one day. I kept saying it and when Ken Heebner got out of housing stocks and the biggest real estate investor sold all of his holdings in 2006, I KNEW it was over. The calamities to come however. No one could have known. Until this year that is. That is when it became apparent (well it was before that for those "in the know") that loans were given to people who had NO BUSINESS EVER receiving the financing they did. This was all done on a "bet" that "housing would continue to rise." How asinine is that??? Unbelievable greed at its finest. This is what is sick about my favorite, and the only form of rule that can make poor people wealthy, form of government. Capitalism.

The fact is we are headed down a road of socialism and I don't know what that will do with all my stocks. But all I am praying for is that the companies that were stupid and greedy enough to do these things will just have to take the beatings. I know it sucks but giving a $500,000 loan to someone without checking on their get what you deserve.

I want the market to solve this and the government to stay the F out. I don't want them to touch this market and I want the strong to survive this wreck and the weak to leave. If we elect the Socialist Obama (which is looking more likelier) it is doubtful that we will be moving "forward" any time soon.

For now I continue to preach cash unless you were smart and went short with me when I went short. No one says when I go short 300 shares that you do too. You guys realize that commissions are $1 per 100 shares nowadays. You can go long 3 shares of AAPL short and enjoy the gains with me. The fact is that the money was laying on the floor this morning and in a lot of my shorts up over 25% in under a month I did take around 1/2 the money off the table in profits. I am now around 90% cash and will continue to monitor the market. However, I don't expect the market to rally higher.

In fact, I believe the market is just starting a long selloff and believe that the market has a long PROLONGED period of underperformance. However, I am a great stock picker and stocks like NCIT and LPHI, when you look at the fundamentals, you have to know in the future, when the market is ready to trend up, stocks "like those" (I AM NOT SAYING THOSE TWO ARE FOR SURE, Obviously) will do well. We will have a better market to choose from and some of these HORRIBLE mutual, hedge, pension, lending funds deserve and need to go out of business to have the honest and respectable investors take over a market hobbled by a bunch of regulatory BS.

Also the ban on short selling is the most ridiculous thing I have ever seen and I believe it is a sham and a scam to the American people once again. Any time you blame the short sellers, you send off a HUGE RED FLAG TO ME that their is real problems. So the fact that they think it is necessary to halt the short sells of like 900 stocks is a sign of massive problems and unlike 1987 I don't think our plunge on Monday was the last one. I believe, by looking and reading my charts (you know, crazy voodoo tactics), that there is a lot more pain in store. The leaders just cracked apart. They have a LONG way to fall. I know so many buying them at the top. That is GREED my friends. Greed destroys capitalism. Everyone gets what they deserve. If you buy AAPL at 170 and you don't cut your loss then you deserve to feed my family as it falls to $20 and I am short. Dumb money moves to the smart. It always has and it always will.

However, for the first time in a long time I am starting to believe a lot of the stuff Ron Paul has to say is starting to make a lot of damn sense. You know the Congress is MESSED UP when you hear that from me. I think the Fed should not DARE inject more liquidity and if it takes 11 years to return to the 2000 Nasdaq highs then so be it. During that time, I will find hidden gems that will do better with less market greedy psychotics trading my stocks. From 1996-the top in 2000 it was easy. It was easy in 2003 and basically 2004. Since then making money has been hard. But this is the hardest environment I have EVER seen. Way harder than 2000-2002. Why? It is hard to short because perfect short setups are not forming like they did in 2000 and obviously beautiful charts like that from 1999 and 2003 will not be showing up till at least 2009 if not 2010. Reality must be looked at here. Those that LOVE THE STOCK MARKET, like me, will still be around. Will you. I hope so.

I hope everyone feels a little better that the market did not fall apart today. I am glad some people used rational behavior and made a market for stocks today. Things are very bad (in fact darn right horrible) and I do expect a recession. However recessions set us up for new and exciting companies. The only thing that can destroy this country is spending too much via Congress (so far they are bringing us closer to our deaths) and complete greed/corruption ruining great markets in the greatest country that creates some of the greatest inventions the world has ever seen. The railroads, the airplane, landing on the moon, the TV, and the computer. You know that the spending on baby boomers will rise as they get older. Healthcare, Medical, and Biotech stocks should do OK during this rough market and if we can get the averages above the 50 and 200 day moving average with the 50 leading the 200 I am sure we will see other great longs. Just like ANCI was. I am still long this stock and enjoy a nice 91% gain in three months despite the worst market we have seen since 1987.

I can not wait till my max green charts loaded with strong accumulation with a huge surge of volume on the breakout come back. Everyone told me after 2000 that I would never see the charts I saw with my own eyes and that I have posted in my PAST BIG WINNERS section for longs ever again. 2003 proved them wrong and the future will prove those that think they will not show up again wrong. Never short America. We have had other bouts with socialism and many great stocks still appeared during those times. Don't worry I will find your needles in the haystack. Charts like LMLP in 1999 and EPIC/HIL in 2003 will setup again. Trust me. History always repeats itself. At Big Wave Trading, with me, Market Speculator, and Author Ego you will always be long uptrends and in cash or short downtrends. There will never be an unexpected crash that kills and wipes out our gains. I know how to read the market, I know how to actively invest in the market, and I LOVE DOING IT. I started doing this at 16. The goal is to make at least 96 to make it 80 years of trading. I'll be here the whole way.

Aloha and remember better times to go long WILL come again. For those that were trapped and lost a lot of money, try a subscription to the BWT site for a month. What do you go to lose. A cost of my subsciption was probably lost by more than 1,000,000 active traders. A full year sub was probably lost 10x over by a lot of people yesterday. Be wise with your money and even wiser with your money in the market. Aloha and I will see you tomorrow around 7AM HST.

By the way, for those that care, I saw the biggest turtle in my life today snorkeling after surfing. Pretty crazy after 8+ years here and many snorkeling trips that I finally saw a turtle as big as me. My friends it was huge. I wonder how old he was? Surfing and snorkeling. Sure beats this market. Unless you are 400% short.

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