Thursday, January 08, 2009

Stocks Put In A Very Bullish Session, With The Nasdaq and Russell 2000 Closing at the HOD, On Lower Volume

Stock indexes had a pretty strong showing but overall were not making much progress for most of the day. But by the end of the day the stock market took off and the DJIA closed at its best levels intraday after the open, the SP 500 closed near the HOD, and the Nasdaq and RUT 2K closed at the HOD. The only problem with the gains is that they came on lower volume. Well, I guess there was a second problem in that it did not take much back from the previous day's selloff.

However, many stocks seemed to put in very strong reversals today after a bit of selling and some of our longs that still look a bit shaky are all still holding their most recent lows in there base. So things are not ugly out there but at the same time they are not pretty yet either.

In fact, if you take a look at the SP-500 from 10/9/2008 to 1/8/2009 you will see that the NYSE has moved only -0.02%. That means for the past three months we have basically gone nowhere in the stock market. That is why the recent longs we have taken started off well but have all fizzled out somewhat (some haven't so we need to cross our fingers) and why the recent shorts we have are working but not going too far just yet.

At first, at the start of this week, it appeared that we were about to rally a little bit on lower volume. While I am never thrilled with a low volume rally, if this is all we can get right now I will take it. But after going long four stocks recently that had very nice to near-perfect charts (no perfect) I can honestly say that they have not performed like I expected them to perform. I know what the main problem is: that is the market. However, there is a secondary problem: the charts are not perfect which means they are subject to a poor market affecting them more than if the market was rallying on higher volume.

If we had a rally happening off the November lows on higher volume I would be very bullish on my longs and would assume we would not have had to cut any that we took recently (there was a full sell today) and the stocks that are doing well would be doing much better like they were about a month to two months ago for a couple of long term winners. However, the lower volume continues to make all longs suspect and that is why I have continued to tell my subscribers to keep their longs small.

Some wanted to argue with me about a recent breakout. Some said that it not closing at the HOD put it in a better position to be a "safer" long. Well now that person sees how that turned out. A higher volume close near or at the HOD shows that the big boys were scooping it up all the way into the close and chances are high they will return again the next day to continue their operation. The fact a stock doesn't close near the HOD suggest funds are not that anxious to buy the stock at any price. That usually means a little hit. The other long we took closed near the HOD and the next day green BOP remains and another HOD close has followed. We can't complain about that. We can do the complaining later when the market hurts another beautiful chart pattern in a stock with very strong recent fundamental growth.

This market, like I showed you with the SP 500 the past three months, is really not going very far. And that is what happens when the big boys step to the side and let the retail crowd take over. The retail traders can not move the market and even if they do their movement will not hold. It take pension, mutual, hedge, school, insurance funds to do this. They move the market and if you study the NYSE and Nasdaq on your charts you can see that we have not had real higher volume by institutional investors since 12/8/08 on the NYSE (leaving the quadruple witching day out). Also the Nasdaq just recently had its first higher than average volume day two days ago. That was its first above average volume day since 11/21.

So as you can see, unless you like dealing with retail driven markets where bids and ask can move in a flash and disappear just as quickly you are more than welcome to fully margin yourself on longs and shorts. I will instead keep my cash level highs so that I don't have it trapped in a mediocre play whenever those "near-perfect to perfect" short and long pattern show up. I am ready to get fully long on full margin but at the same time I am extremely patient and will wait for that beautiful perfect chart so that I may load up and make a lot of money on a for sure thing. Doing that instead of gambling away my earnings on stocks that "might" work even with nice chart patterns is the way I prefer to do business. You can gamble. I never gamble. Even when I played poker I NEVER gambled. Everything was calculated and read from the opponents.

This is how you must treat the market. Aloha everyone, have a great Friday, and I will see you when I get my next commentary posted. I want to thank all the Platinum members for showing up today. We still only have about 33% of you in at one time but the numbers are higher and it is getting more fun. I love you all and want to thank everyone for making this site such a fun site. What really helped was this bear market getting rid of those who are not serious and those who are just plain crooks. GOOD RIDANCE!

stocks I am short with total returns UP today: CEDC 57% RIMM 53% SDA 73% AMX 42% TITN 39% ARB 65% CEO 23% SPG 38%


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