Tuesday, January 06, 2009

Market Sells Off On Slightly Higher Volume But A Nice Last Hour Rally Saves The Market From A Real Distribution Day

It was an EXTREMELY active day in the platinum chat room and the gold forums as market players officially return from the 2-week shortened holiday season. I hope everyone had a great holiday season and spent some time with loved ones and friends. I know I had a wonderful time and it was even made better since I got to be in shorts and a t-shirt the entire time while the mainland froze in most parts. I only hope that you all get the nice mild weather we have received here.

Getting back to the market, I would say that today was the "official" first day of the 2009 year as Friday's session came after a night of drunken insanity by most that deal on Broad and Wall. However, we were here spotting potential longs that might breakout soon. Good thing I work while others mess off. The working paid off and we have three very nice longs and one very good short selection. With the mixed trend and some good stock picking skills it should turn out to be a very fun market as both our longs AND shorts are working.

Recently, everything we have gone long has moved higher, while old shorts continue to hold well below resistance and new shorts actually fell today instead of rising like most recent shorts have. So our 32 small short positions are all in the clear and our 12 longs with about 3 being of OK size are doing very well. We don't have a loser in the longs and everything has worked that we have touched this month. As long as this keeps going now that only bodes well for us 10x over when a real bull market starts or when the bear starts another leg down. Either way, as you can tell I AM READY. Unlike the talking biased billboards on CNBC. There you will only get a bull side or a bear side and you can be sure those positions are biased based on the holdings of the interviewee.

Those that do not prepare for this market to fail or prepare for this market to run are going to find themselves wondering what to do next when their biased views turn out wrong. And let me tell you, I have seen some interesting 2009 predictions that range from the market up 25% to the market down 50%. People are all over the map. But no matter what, I can guarantee that those that think the market will be up will say, if the market is down, that they were still right and something was wrong with the market. However, when you finish down 40% for the year like Jim Cramer, which so many watch like mindless zombies (yes we can, yes we can, yes we can....boyaah; robots!), you are still wrong not right.

The only way to be right in the market is if you are making money. And when it comes to day to day returns, I could CARE LESS about what you made today! What I want to know is what you made the past 3 months, the past 6 months, the past 12 months, the past 24, and the past 36 months. That is what really counts. Do you think I am going to trust my money to someone who beats it big one day out of the year and brags yet misses every other day of the year? I don't think so.

This market is still rallying on lower volume but there is an apparent increase in volume and today it was to the downside. However, even if today is a technical distribution day by the books with all indexes down .25% or more, it would seem that the increase in volume was a bad thing today. Too bad people can't get past the actual price move for the day and the actual price of the index they are watching on CNN or MSNBC.

If they would look past the prices you could see that volume was indeed up today but volume was still well below the 50 day volume average. Now the weighting of the average line is dropping since we have rallied on lower volume the whole way the past month. This could lead to the market's volume jumping above average pretty soon thus telling us that the big institutional money is coming back to work in the market. If this volume jumps you can be sure I will go from bearish-overall-but-short-term-bullish to BULLISH. Why? Because we do have some nice charts setting up.

Now do not get me wrong, even after a month of rallying off the November lows, we do have some nice charts that are popping up A*** A*** E*** M*** and a few others have the price, volume, and BOP action that I love when going long a stock. However, it is totally up to the market if it wants me to go up 100% to 400% fully long or go down 100% to 400% fully short. To not be prepared for a bull market or a bear market here is foolish. The last way you can look at this market is as a bull or bear market. It is mixed.

So for now, I continue to be a bull short-term, a bull sub-intermediate term, a bear intermediate term, and a bear long-term. This means that there will be some good recent longs like our ANCI up 51% since June and CSKI up 32% since December 12th. Besides those two beautiful longs, I have another 10 longs that are all moving higher showing gains since we went long and another 32 shorts that continue to act well in perfect downtrends. They are either not breaking above the 50 day moving average on high volume or they are not closing above the 200 day moving average since their big gains.

To sum it up, my long-term shorts continue to tell me that in the future we will hit resistance and turn to new lows. If this wasn't the case or will soon not be the case, then I will get about 10 full covers and then another 22 soon enough. By then I could be long as many as 20 stocks. But hopefully by then there will be more perfect looking stocks like HIL in 2003/HRZ 2006.

Either way, I am patient and know when to pick my spots and if I miss them another chance will come around. Do you know what the most bullish thing I saw today on a DOWN day...there were 25 new 52-week highs to 14 new 52-week lows. Hallelujah!! Do you know what I find odd? That the investors intelligence survey actually has the same amount of bulls and bears at 38.5% each. Short term it looks bullish and feels bullish but has the crowd jumped on this rally too soon with a future that looks to be headed for more troubled signs. Earnings are down seven quarters already and estimates are being lowered. That can't be good for the economy long term.

Anyways it is amazing the crowd and professionals turned bullish so fast after a LOW VOLUME rally with LEADING stocks lagging the beaten down turds that lost tons of value. The leading stocks we are long like ANCI 51% gain, QCOR 35% gain, and CSKI 32% gain all have one thing in common. What is it? If you guessed they are all related to the medical arena you nailed it. And one of the fastest growing groups on the left side of the Investors Business Daily 197 industry group list. As you can see Medical-related stocks are flying up the list. Pretty soon, at the rate the Medical stocks are growing, we will soon see Medical stocks dominate the whole black box of the top 20 industry groups.

If you don't remember, somewhere from May to August, almost the entire top 20 industry groups were Medical stocks. That shows you how much we love to stay healthy and make our lives better for us and everyone around us, even in a horrible bear market. Thanks to Doctor malpractice insurance, unnecessary lawsuits, and overuse of our medical system you can bet even in a down market Medical stocks will lead at some point. Some things never change. :)

top longs/(shorts) w/ total returns UP today: ANCI 51% CSKI 32% (CYT 57% CPRT 20% CASY 20% SPG 38% PLCE 21% CAJ 29% CETV 74%)

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