Monday, May 25, 2009

Stock Indexes End Slightly Lower On Lowest Volume Since The Beginning Of The Year


I have scanned over 5,000 stocks this weekend and can honestly say that there are some very nice charts out there. SADLY, those charts are all in the sub-$10 category with most sub-$5. The good news is that there are still a lot of high quality CANSLIM stocks like GMCR, PEGA, NTES, TNDM, HMSY, CMG, NFLX, AAN, JOSB, SNDA, AMT, CRM, EQIX, and ASIA that are moving higher, even if they are not setting up and breaking out of the chart patterns I like. However, at the same time, it is a very mixed market, as stocks like AIPC, ALGT, IDCC, QSII, and DMND have setup and broken out of bases, started to move higher, and then have all disappointed by falling below their pivot points.

This mixed action is common and not surprising after the huge selloff we just went through. A lot of people that are not focused on the cheap stocks and most beaten up stocks basically missed the sweet part of the move higher, but if this market is going to turn into a bull, and not die as just another bear market rally, they will be rewarded as those stocks will be the stocks that produce the largest gains in a sustained bull.

Is this going to be a sustainable uptrend? Right now the verdict is mixed as cheap, small, and beaten stocks have been the only stocks to really profit after such a downtrend like we had in late 2007 to March 2009. It is always good when these stocks rally but it is twice as nice if they rally with CANSLIM quality longs. This was the case in late 2002 and especially in March 2003 as both CANSLIM quality and beaten up cheap stocks took off toward the heavens. It still appears to be a market where you must take gains fast at the 25%, 33%, 50%, 66%, 75%, 100%, and 150% moves in the stock. The time to hold for the 300%-1,000%+ returns still is not here. When it is here, you can be sure I will let you know.

PLEASE, if you see a soldier anywhere at a store, airport, mall, etc..., make sure you say hello and give them a big thank you even if it feels odd. It means a lot and is just a small way for us to say 'thank you.' God bless you troops.

I hope everyone has a great Memorial Day and I hope you had a wonderful weekend. I will be back later on this evening to expand on my weekend market thoughts. Platinum subscribers remember to check the 'new Platinum longs' area for new longs off the lows (five new longs). Silver, Gold, and Platinum members if you checked out the 'New Longs' earlier in the weekend, you might want to check back as another CANSLIM quality (yet speculative) long has been added. Once again, have a wonderful Memorial Day. I will be back with more market commentary whenever I finish my first surf session of the day (it feels good to be surfing again). Aloha!

Monday thoughts:

Looking ahead to the short week, I believe that we must remain fluid and unbiased as the market is in a mixed trend on multiple time frames with some trends up and some down. The only stocks that continue to produce good sized gains are the thin, low volume, and cheap stocks. The top quality longs still are not setting up in proper bases to have a breakout be worth a long-term hold. The way stocks have been acting it still seems that it is smart to take profits on the way up, instead of looking at those early big profits as "just the start."

Whenever stocks start to breakout, continue to run, setup, and then breakout and run higher, then I will look to go back to my historically proven methodology of producing the largest gains which is a form of growth-momentum-CANSLIM position investing. Like I posted earlier some stocks like GMCR are acting just like they should but at the same time stocks like QSII are still out there. That kind of action is what keeps me from going fully invested.

Some people were even questioning me for not being fully invested. I had to remind these investors/traders that my main methodology is not daytrading the 3x ETFs and futures or swing trading. My main methodology is the #1 strategy since 1998 according to AAII with a return over 1,500% AFTER the bear market of 2008. The CANSLIM methodology along with my own momentum/growth position trading with stocks with beautiful chart patterns, allows me to produce returns that have allowed me to make investing in the markets my full-time profession since I was a late-teenager. Not too many young guys can make a consistent decent living on an island where the cost of living is a tragedy of expensive proportions. Thanks to IBD and the CANSLIM methodology, along with a lot of market experience now, I can do that. However, is it IBD and CANSLIM that has allowed me this great life? No. It is the men and women that serve in the armed forces.

Once again, soldiers, I want to say thank you. I can not express my gratitude enough to you men and women that serve in uniform and the only thing I know that I can do to express how thankful I am is to post it multiple times on my blog. You guys and girls are the reason why people like me can do what we love to do for a living. THANK YOU!

We will see where we end up at the end of this week. I just want to remind all those that are now fully bearish again that, so far, we are pulling back on lower volume after rallying on heavier volume. For those of you that are fully bullish, I want to remind you that in bull markets that I have been a part of in 1997, 1998, 1999, and 2002-2007, you can not find ONE TIME where the low-quality longs have dominated an uptrend the way low-quality longs have this one. Another thing you do not see often in rallies is leading stocks lag. In fact, I almost can not remember the last time I saw leading stocks lag like this, unless I look at the bear market of 2000-2002. The rally attempt of May to July in 2000 had leading stocks lag. That rally failed. From April to June in 2001 leading stocks lagged. That rally attempt failed. The September 2001 to January 2002 had leading stocks lag. That rally failed. The summer rally of 2002 had leading stocks lag. That rally attempt too failed.

In late 2002, leading stocks in the internet-ISP group which was the #1 group at the time start breaking out. Telecom stocks then follow unleashing a powerful rally with leading stocks producing huge gains. Once again leading stocks lead. In bull markets, leading stocks lead. In bear markets, they lag. Leading stocks have been lagging. How do you think this is going to end?

Stay alert and ready for anything, remember to take gains when you have them, and to get rid of losses before they accumulate into anything serious, and stay positive. Trending markets on the upside will return. Watch the IBD 100 and IBD 85-85 for the signal to get back to the long side in a large way. When it is time to rally big, I will let you know. Well, I'll let the subscribers know, at least. Aloha!

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