Wednesday, January 14, 2009

Is This A Start Of Another Nasty Selloff? Probably! I Hate To Say I Told You…

Well, I wish there was a lot of profound wisdom that I could put here that I have not already given. But I don't think I need to add to much because I have been pretty adamant about people not going long the recent rally from the November lows.

Why did I advise against this? Easy! Because most people that went long the lows in November DID NOT sell out at the high in this move. Instead AAII and investors intelligence surveys showed that bulls were beating bears in both polls. This, along with the VIX failing to hit the 1.7 to 2.0 level shows me that this means people are and were too complacent on this market. Now most have losses from their recent purchases. They can now add those losses to their previous losses from trying to "bottom fish" the most recent downtrend in 2008.

I have been saying this for a very long time and I will say it again. Most of my shorts that I took before October are all still shorts, except for two of them. And those two are back to being good short positions. So it was stupid to cover those. Take the fact that all my long-term shorts with the lack of beautiful longs setting was proof positive that the worst of this market was not over.

Instead it appears that it was just a lull before another storm. The eye of the hurricane, if you will. And that is exactly what "bottom fishers" have been hit by in this market: a giant hurricane. Now, that isn't to say my long strategy isn't perfect (OBVIOUSLY in bear markets I am going to lose more on longs than succeed--it's an odds game) but my short strategy seems to be on point. How do I know that? Once again, it's easy! 33 of my 34 short holdings were UP FOR ME today which means today was a decent day for yours truly.

The few shorts that we have remaining continues to work and work and work, and what is even more problematic for investors that are long only is the fact that the amount of nice solid strong charts look bleaker now than even in November. The good news is that we have not been focused on longs and have instead been focused on the short side. It is quite clear to me that not only is CASH IS KING! but BEING SHORT is the way to make big money in this market.

I need to make it clear that if you are a new investor and do not have a track record of making money on the long side in bull markets that you may want to wait for a rally on the indexes with other nice stocks breaking out so that you can put your money to work at the right time. I know a lot of you want to either buy the few "nice" chart patterns that are out there but the facts just told us that buying "nice" breakouts in stocks with good fundamentals is strictly not working now. The better news for us is that bottom fishers are doing much worse.

If it is of any comfort to all of you out there you now know that not only was I bullish from 99-00, bearish from 00-02, bullish from 02-07, and bearish from 07-now but that I have a track record of making very strong gains in bull markets and can clearly beat the overall market by leaps and bounds in bear markets. How do we do that? Easy! We buy stocks in uptrends and add to the best stocks that bounce right off key averages (that is if they have either "perfect" charts or excellent CANSLIM ratings) and short stocks in downtrends that can't get over the 50 and 200 day moving averages. My longs made a TON of money during the last bull market and this bear market has been very friendly to us.

If you still think that the November lows are going to hold, you really need to actually learn technical analysis. And by learn TA, I do NOT mean watch Cramer's charts-vs-fundamentals crap on CNBC. This segment really bugs me because whatever technicians he is talking to, they are not that bright. I saw EWZ used as an example of a "nice chart." Exuse me?!!! That is pure crap! That is an ugly chart. However, not nearly as ugly as POT which he said was a "nice chart." Is he off his rocker? Did TSCM not even research my past winners when they hired me last year? Did they even look at my Past Big Winners in my longs section and take a peek at the shorts Past Big Winners? I doubt it and that is why TSCM is a shell of its former glory self. Sad.

Anyways, the bottom line is that no one can say "Joshua, but you didn't tell me the market wasn't a buy on the way up in the last uptrend." Uhm, that is BS. Anyone that reads my longs section knows that there were only a few recent longs that looked great and they all disappointed as we moved along. In fact in 5 days we have gone from 13 small longs to only 6 much smaller longs. If this was a bottom and the November lows were going to hold, it would have been the other way around--we would have gone from 6 longs to 13 longs. We also would not have increased our short exposure which has recently happened thanks to new shorts like our new short today.

This market is very ugly and I please ask everyone to watch the LAST FIVE VIDEOS of part one to clearly see that I remained bearish the entire time. No one out there ever has to worry about my integrity because this site documents EVERY word I type. You can anything you need to find by using the search engine at the upper right hand side of the .com and .net site.

I hate to say I told you so BUT I DID TELL YOU SO. This market and its breakdown yesterday with these hideous charts is a clear sign to get out of dodge. If any of you are still holding longs, you really need to consider selling them unless you have a twenty year horizon. I also suggest everyone study Japan 1990 to now and the DJIA from 1928-1954. I think that will put you in great perspective of where we are. But at the same time while that may look gloomy remember I WILL make good money on the few "hot" or "perfect" charts that do setup during those bullish rallies. So don't worry too much about us becoming Japan of 1990 we will still find stocks with nice charts and growing fundamentals that the big boys will trip over themselves to get into. However, more pain has to happen before the good news starts kicking in.

Leaders are born and made in great difficulties! They are not made in times of joy and peace. So when the going gets tough I get going. And that is exactly what I am going to do here. Enjoy the video and remember if you don't have time to watch here you can go to iTunes and search for "Joshua Hayes" and find the videos there. This might help some of you transient guys in NYC, SF, or LA.

We'll see what tomorrow brings. But with 35 (now after our new short) shorts and only 6 longs I think we know where we are headed. Remember, these are NOT my opinions when I get long or short a stock. I am simply following the rules that history has shown repeats itself every time all the time. This is all supply and demand and human emotions. What a toxic combination.


top shorts w/ total returns UP on the day: (coming very soon)



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