Some big misses by two heavyweights weighed heavily on the indexes as the stock market suffered its second distribution day in as many days. GOOG and CAT were both nailed with 8% losses before the opening bell, after both issued poor earnings that missed estimates. However, as the day wore on neither of these issues saw much more selling and both found solid support at their 50 day moving averages, giving some comfort to the bulls. But, for the day, the damage was done.
The DJIA fell 1.1%, the SP 500, Nassy, and NYSE fell 1.2%, and the SP 600 led the way down with a 1.7% loss. The great news was that leading stocks, in the form of the IBD 100 only lost 1.3%, outperforming the SP 600. However, the losses were a bit worse during the day, so the fact that the indexes closed off the lows is a slight positive. Combine that with Wednesday’s action where the Nassy actually closed higher than the open and you can see we have two distro days that aren’t very powerful.
The higher volume in the market combined with breadth 3-to-1 negative on the NYSE, 11-to-4 negative on the Nassy, and 27-to-3 negative on the DJIA gave the impression that things were really bad out there. However, despite there being 326 new lows there were also 216 new highs which shows that there were some decent pockets of strength out there. If today was really as bad as the indexes looked, trust me, there would have been a lot less new highs. So that gives some indication that the selling was not that bad.
And to go along with the data, two things occurred that really stick out after Friday’s losses. The put/call ratio jumped and closed over 1 at 1.02. That high reading shows that as stocks fell, traders decided to buy puts betting that prices are going to continue to go lower. That in of itself is not that impressive. But when you combine that the options crowd is bearish with the fact that the NYSE short interest ratio is at ANOTHER all-time high you have some real interesting developments. The NYSE short interest ratio is now at 8.25% which is an all-time high!!! That means 8% of trading on the NYSE is done in shorts. This DESPITE THE MARKET BEING ONLY 1% TO 2% BELOW ALL-TIME AND SIX-AND-A-HALF YEAR HIGHS.
When you take all of this combined with some leading stocks like AAPL and ISRG still making new highs and it becomes clear that Friday produced some panic. Markets do NOT top with panic. They top with euphoria. Even though BIDU and GOOG dropped and some are calling for a top via those two stocks, you have to remember that BIDU is still in a solid uptrend and GOOG had a very bullish intraday reversal off its 50 dma. So you are really grabbing at straws if you are calling a top here. Unless you only look at bank stocks and GOOG, there is no way you can agree with that argument.
The rest of the market seems OK. I had only a handful of complete sells and almost all of those were in very poor issues. The partial sales I had were made based on pure discipline. But when looking at their weekly and long term daily charts it is obvious there is nothing wrong with these stocks. Hell, look at one of the best sectors out there Transport-Shipping. ESEA, TBSI, DRYS, and DSX show NO signs of topping and all are still on fire and look ready for plenty of gains. Then you have the clear leader during this current bull market: Chemicals. CF, TRA, TNH, and the other stocks in this sector show no signs of topping. Until you see those two sectors top, along with stocks like MA RIMM AAPL FWLT CME ICE and CROX, you can be sure the market top is not here. You will need to see ALL of these leaders suffer some major distribution and fail there rallies before we can even THINK of a top forming.
For the week, it seems obvious that it was not that bad, with the Nassy losing only .7% and the DJIA losing only .4%. But the SP 500 lost 1.2%, the NYSE lost 1.4%, and the SP 600 lost 1.6%. However, none of these losses were severe considering the run that they have been on this year. It was a wild week with a good Tuesday, bad Wednesday (but great close), great Thursday, and a terrible Friday. But that is what makes this market fun.
The one topic dejour this week was subprime loans. And if you don’t think it is going to get worse, I would love to bring your attention to the bank stocks. If you are an experienced chartist and you know what stocks look like when they top after multi-year runs then you are certainly taking notice at the banks. SINCE ALL OF THEM HAVE THE EXACT SAME CHART!! They are topping. Rather it is MER, C, BAC, USB, JPM, UBS, BBT, GS, LEG, LEH, BSC, WB, or SBNY it doesn’t matter. These stocks are rolling over on MASSIVE distribution that has been playing itself out ALL YEAR LONG. That is why you see ALL of those big tall red bars where volume is during 2007 in ALL of these stocks. That is why ALL of them are rolling over. Unless these stocks get a HUGE bid right here, these charts are setup for some shorts to make a lot of money. These daily or weekly charts going back to late 2002 is just what ALL classic tops look like. This is some massive distribution in the whole sector.
The best thing about this that confirms my charts is that earnings that are being reported are great. Last quarters and the few banks that have released this quarter are releasing some great fantastic learning earnings. However, as all of us experienced investors know, the fundamentals ALWAYS!!! look the best at the top. The current charts are telling us that the subprime and housing market is about ready to start to show up in the books of the financials. What even makes this better is that all of you who read me and do not subscribe to me can watch me RIGHT NOW either help you not lose money or make you money by shorting the financials.
While this is happening, all of your brilliant MBA analyst and big money traders like Joe Capone and Scott Rothbort are telling you that they are bargains on this selloff and that you must buy. Until the “smart” fundamentalist and analyst start issuing sells in this sector, you can guarantee these stock aren’t going to stop falling. When they start issuing sells, that is when you should cover. These dummies just don’t get it and they never will. Yet, you will probably give them your money since they sound oh so smart and have one of those fancy degrees on their walls. These “higher educated” fundamental morons are going to lose their clients some money on the short term. While this “dumb surfer” either helps mine make money or not lose money. If you are long ANY stock in the bank sector and it is below the 50 and 200 day moving average, get the hell out!!!! While you are losing money, you are missing out on stocks like PRGX which make 7% gains on days where the market is down 1.5%. Which stocks are you in? If you are a subscriber to my service I know which stocks you are in.
Back to the market: Despite the ugliness in the financials, I have to say that my leading stocks continue to look great. Even though the DJIA did the 14k breakout and trap (which I eluded that it was going to do that last week) it still remains a strong market in an uptrend with all indexes still above their 50 day moving averages. Earnings season is always a rough one and many stocks are either punished HARD or rewarded handsomely. But with the trend still up, even bad earnings can turn into good so it is not smart to panic if your stock sells off a little after a miss. However, if the indexes cut their 50 day moving averages, leading stock falter, all your new buys start sucking up the joint, and good earnings are treated like bad earnings, then you will have a reason to get defensive.
The possibility out there is for anything right now as it always is in earnings season. This upcoming week we have AXP KLAC MRK X MMM NFLX T DD PEP AMZN GLW and XOM set to report. As it is now we have a lot more disappointments than we are used to seeing but like I have said now 100 times, unless we start to actually selloff and fail rally attempts there is no reason to worry about anything.
Two more points I want to hit before I am finished: The amount of new lows that kept expanding while stock prices kept hitting new highs did hint that Friday was coming. On Wednesday we had a TON of new lows which clearly showed that their was weakness in the market building up to the losses on Friday. So, honestly, this selling should have caught NO ONE off guard. Especially my subscribers. And the last thing is BX. How about that scam stock. What is it now? Down 30%. Can anyone say Refco. This is why you must ALWAYS wait for a stock to trade long enough to create a base. Buying stocks before a proper breakout put you into things like Refco, BX, and IBKR. I use IBKR as my broker. I LOVE THEIR SOFTWARE!!!!! Did you see me buy the stock because of that? Did I buy it because my emotions told me to since I love the company so much? No. Do you know why? Because I am a professional.
If you buy ANY stock for ANY other reason than due to historical analysis and fundamental and technical actions, you are nothing but a gambler. And my suggestion to you is to get your act together or go find a new hobby. People like me are going to take ALL of your money. Why gamble when their is one book out there that can teach you how to fish for yourself? How To Make Money In Stocks by William J ONeil. I know one thing, I sure would not want to feel like the loser down the street that can only invest off of tips. How powerless are you when you make investment decisions off of tips? I know one thing: I LOVE BEING IN COMPLETE CONTROL. And the first step in becoming completely in control is admitting you control nothing. Especially the market. The stock market does not care about YOU or your opinions. Which is, sadly, about all I hear out there in the free chat rooms and on this island.
Aloha and I will see you in the chat room.
PS: This is the last weekend post for the free blog for two weeks. I will be on vacation. For paid subscribers you will still see plenty of me, don’t worry.
top current holdings up this week - purchase date
TRCR 536% - 1/12
MA 241% - 8/2
OMTR 192% - 9/15
IHS 155% - 12/21/05
CKSW 148% - 10/11
ULTR 147% - 10/27
KHD 140% - 5/30/06
DECK 124% - 9/13
PRGX 123% - 1/12
TTEC 120% - 8/25
HRZ 117% - 9/27
CNH 114% - 11/2
EVEP 114% - 11/16
CPA 105% - 9/15
FTEK 99% - 10/6
HURN 99% - 9/13
VDSI 98% - 1/14
IGLD 93% - 10/26
VSR 87% - 6/15
CXW 86% - 5/19/06
NAVI 79% - 12/18
APLX 77% - 9/28
INNO 74% - 6/4
HURC 73% - 12/18
FSLR 72% - 5/22
TESO 70% - 2/16
LFL 66% - 12/13
AFSI 65% - 4/12
TASR 64% - 6/6
CRNT 63% - 5/21
SNDA 55% - 12/26
NTLS 55% - 1/30
IMA 55% - 8/2
XRA 50% - 5/24
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Showing posts with label make money. Show all posts
Showing posts with label make money. Show all posts
Saturday, July 21, 2007
Saturday, June 23, 2007
Stocks End The Week Full Of Red; NYSE And SP 500 Barely Close Below Their 50 Day Moving Averages
A slow but constant selloff hit stocks on a rebalancing day for the Russell indexes, as stocks closed near their session lows, closing lower for the first Friday in sixteen sessions. The losses came despite the debut of private-equity firm Blackstone Group. At the close the DJIA led the way lower with a 1.4% loss, the SP 500 took a 1.3% haircut, the NYSE and Nasdaq lost 1.1%, and the SP 600 held up the best only losing .9%. The blame on the losses were contributed to the subprime problems announced by BSC.
Holding up, along with the small caps, leading stocks in the form of the IBD 100 also lost only .9%. This continues a trend of this index outperforming to the upside and holding up better on the selloffs over the broad market. If this index was leading to the downside on these selloffs, I would be more worried. Instead it looks like normal choppy summer action.
Volume finished over 30% higher on the NYSE and the Nasdaq, due to the Russell rebalance. The key to today’s trading was knowing the facts of the intraday volume action. Volume was trending lower all day long, signaling that institutions were not dumping stocks, until the last hour of the day. That is when volume exploded. But it wasn’t due to selling by big funds. It was due to mutual funds having to reposition their index funds for the stocks that are entering and exiting the Russell index. Therefore, the higher volume with the losses do not signal a distribution day. Investors Business Daily confirms my thinking on this subject.
Breadth was decisively negative with decliners beating advancers on the NYSE by a 3-to-1 ratio and on the Nasdaq by a 2-to-1 ratio. Another nasty number, along with breadth, is that the new lows are trying to expand again, despite the indexes only being 2% or so off of their highs. New 52-week highs only came in with 171, compared to the new 52-week lows registering 144. That is a lot of new lows for a market near new highs. I am not sure how to interpret this.
For the week, the SP 500 and the DJIA led the way lower losing 2%, the NYSE and SP 600 lost 1.7%, and the Nasdaq was lower by 1.4%. Showing investors how leading stocks are supposed to act, even in a poor market, the IBD 100 managed a .1% gain for the week. This is why leading stocks outperform in the long run. The IBD 100 is now up 19% for the year, while most indexes are up around 10%. This goes to prove, ONCE AGAIN, that the big money is made by buying leading stocks, breaking out of sound bases with top fundamentals, in a bull market.
And that brings me to my own portfolio. Most of my longs are all holding key support and are still showing excellent price and volume action. Some stocks, obviously, have been cut this past week with the week market. But that is a good thing. Rough markets give you the chance to weed out the poor performing stocks and move more money into better performing stocks. This is why downtrends are good in a bull market. Constant uptrends make it hard for me to cut stocks that are holding support but not going very far. If I cut them too early, they end up taking off. Then the new stock I buy gives me a quick cut loss. But with markets that have normal pullbacks, I am allowed to separate the weak from the strong.
The only bad part is when one of those weak end up being a large position. Usually it does not happen, but it has happened a couple times recently which indicates to me I need to be more selective and careful with which stocks I pick to load up on. Besides stocks like MTRX and TTG, everything, pretty much, is acting just like it should be acting. Stocks moving higher, holding key support, and moving higher again. As long as top stocks, my stocks, and leading sector stocks keep acting like this it is silly to be calling market tops here. Especially with the NYSE short-interest ratio hitting ANOTHER all-time high at 7.82. Wow! They keep shorting this market despite the near new highs. Brave, I must say. Stupid, I must say.
I hear some people mention that there are too many bulls in the investors intelligence survey at 53% and too few bulls at 19% so we have to be near a top. What these people must not understand is that this survey is HORRIBLE at calling tops. It is ONLY useful at bottoms where normally bulls and bears cross around the 40-45% area. This happens to be good at correlating bottom with price in the indexes. As for tops? Are you kidding me. I guess anything to help there argument.
It doesn’t matter because I can come right back and say, “have you seen the realmoney.com poll this weekend?” So far, bears have 44% of the vote and bulls have only 31%. Last time I checked that doesn’t mean the crowd is bullish. Also have you seen the UBS sentiment index? It is NO WHERE NEAR euphoria levels. That index has a good track of indicating possible tops when the line hits the euphoria zone. It is not even close. The AAII is even close with 43% bullish and 33% bearish.
I hate to tell you this, bears. This is NOT what you see at tops. You do not see pessimism in the media and polls showing 70% of the public thinking we are in a recession, with NYSE short-interest at all-time highs and euphoria levels so absent from this market. Do you know what else is not out there, besides stocks in the Chemical-Fert group? Stocks in CLEAR end stages of climax runs. I can see some stocks in the middle of runs all over the place and I can clearly see that TNH and CF have gone nuts. But calling a top in these is not smart. These stocks still do not look like they are near a top, much less ready to rollover.
The action of GOOG, AAPL, CROX, RIMM, and other leading stocks are still rocking and are not in major climax runs. So it just seems hard for me to want to call a top when the leaders are still leading and some of them are almost closing near their highs on a day like today. If anything, JDSU in 2000 should be the case study for everyone. After that stock topped, it took SIX MONTHS before the big fall. Trust me, calling tops is a game of ignorance and pure idiocy. The right play is going with the trend. Something a TON of people reading this blog probably are NOT doing. You will see a MAJOR difference if you just learn how to do what the best traders of all-time did.
Are there reasons to pullback? Yes. We are getting overbought on all the oscillators I follow: ARMS index, 10-day moving average of the advance/decline line, and the McClellan. But at the same time I see that only 62% of all stocks in the market are above their 200 day moving average. I am not sure if that is bullish and means there is a lot of stocks waiting to join the run or if this index is confirming the overbought market. But I thought I would still give that fact, considering that in February 86% of all stocks were above the 200 dma. That market was overbought. This market might be overbought short-term but the 62% may signal that there is a lot of energy waiting to join the run.
If that is the case, that would be fine with me, only because I see the VIX ticking up a little. It would be nice to back and fill here, if it causes the VIX to rally over 20. That would help me make a lot more money on my longs that decide to follow-through. A 10% drop would even be better as a chance of VIX hitting 25 would definitely give me more volatility to make more money on stocks that are moving. Remember, a higher VIX gives you more potential for gains in stocks. This persistent low VIX does not allow for many stocks to make 200%-1000% runs in six to twelve months. A low VIX like we have now makes 100% winners spectacular. This is why a choppy market or an uptrend with some more 5% pullbacks would be nice. But with all the bearishness I have mentioned, LOL, along with another number I have left out–put/call is at .94–I doubt I am ever going to get my pullback.
Chances are when this market ends, it is going to unleash a horrible bear market. That would be OK also. That would allow me to short all the old leaders like TNH that have made 1000% plus gains since the rally started. Then after making some nice cash on shorts in the bear market, we will eventually get another bull market WITH A MUCH HIGHER VIX that will then give us a real great bull market to work with. The best time to make money is in markets like March 2003-January 2004. Those bull markets, after severe bear markets are what makes some traders careers.
Before I rap this up, I want to go over one more key component of this rally: the Semiconductor Index (SOX). Everyone always says that they don’t think bull markets are real bull markets unless the Semis are moving. The theory goes is that this is where the “hot” and “speculative” money goes for big returns in a bull market; when the semis are moving, the market is moving. Well now we have the Semis hitting new highs and the only question I have to ask is that: does it mean that the market is bullish now?
This scenario, after giving more thought to it, could run a two-way street. At first all I could think about is how bullish this is and now the perma-bears will have to figure out a crafty excuse to pooh-pooh this move in the Semis. Well they gave me a great argument on Friday. I took notice of the Relative Strength line of the Semiconductor index (SOX) and notice a very negative divergence developing. As price has continued to make a stairstep pattern of higher highs and lower lows, the RS line has actually failed to make new highs during any of the important moves in the SOX this year. Since the high in November, the index hit a series of highs in Jan, Feb, April, May, and Thursday. The problem if you look at your chart is that every RS high is lower.
So we can take this in, in two ways. One is that the market will continue to rally here, and now that the lagging SOX has caught up, the market will make a real more exponential move into new high ground. Or the SOX could be the sector that convinces the bears that this market is going to move higher and we suffer a fakeout-breakout. This would turn enough bears bullish to actually put in a possible top. Somehow, I think scenario one is correct, by simply looking at all my charts and the current situation of the market and leading stocks. But scenario two could happen also. We must NEVER rule ANY scenario out. That is smart trading.
On that note, enjoy your weekend and I will see you in the chat room. ALOHA!
top holdings up this week - purchase date
TRCR 432% - 1/12
MA 239% - 8/2
OMTR 162% - 9/15
IHS 136% - 12/21/05
TTEC 125% - 8/25
FTEK 123% - 10/6
MOS 121% - 10/12
MEH 114% - 8/30
CPA 114% - 9/15
MFW 111% - 1/29
HRZ 107% - 9/27
MCZ 106% - 3/27
DECK 101% - 9/13
CXW 93% - 5/19/06
PRGX 91% - 1/12
HURN 90% - 9/13
CNH 89% - 11/2
EVEP 85% - 11/16
ZNH 84% - 12/26
NTL 83% - 4/13
APLX 82% - 9/28
MVIS 80% - 12/21
VDSI 71% - 1/4
AFSI 69% - 4/12
LFL 66% - 12/13
VSNT 63% - 2/5
LTS 61% - 1/11
TESO 59% - 2/16
BMA 52% - 10/24
ETE 50% - 10/6
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
Holding up, along with the small caps, leading stocks in the form of the IBD 100 also lost only .9%. This continues a trend of this index outperforming to the upside and holding up better on the selloffs over the broad market. If this index was leading to the downside on these selloffs, I would be more worried. Instead it looks like normal choppy summer action.
Volume finished over 30% higher on the NYSE and the Nasdaq, due to the Russell rebalance. The key to today’s trading was knowing the facts of the intraday volume action. Volume was trending lower all day long, signaling that institutions were not dumping stocks, until the last hour of the day. That is when volume exploded. But it wasn’t due to selling by big funds. It was due to mutual funds having to reposition their index funds for the stocks that are entering and exiting the Russell index. Therefore, the higher volume with the losses do not signal a distribution day. Investors Business Daily confirms my thinking on this subject.
Breadth was decisively negative with decliners beating advancers on the NYSE by a 3-to-1 ratio and on the Nasdaq by a 2-to-1 ratio. Another nasty number, along with breadth, is that the new lows are trying to expand again, despite the indexes only being 2% or so off of their highs. New 52-week highs only came in with 171, compared to the new 52-week lows registering 144. That is a lot of new lows for a market near new highs. I am not sure how to interpret this.
For the week, the SP 500 and the DJIA led the way lower losing 2%, the NYSE and SP 600 lost 1.7%, and the Nasdaq was lower by 1.4%. Showing investors how leading stocks are supposed to act, even in a poor market, the IBD 100 managed a .1% gain for the week. This is why leading stocks outperform in the long run. The IBD 100 is now up 19% for the year, while most indexes are up around 10%. This goes to prove, ONCE AGAIN, that the big money is made by buying leading stocks, breaking out of sound bases with top fundamentals, in a bull market.
And that brings me to my own portfolio. Most of my longs are all holding key support and are still showing excellent price and volume action. Some stocks, obviously, have been cut this past week with the week market. But that is a good thing. Rough markets give you the chance to weed out the poor performing stocks and move more money into better performing stocks. This is why downtrends are good in a bull market. Constant uptrends make it hard for me to cut stocks that are holding support but not going very far. If I cut them too early, they end up taking off. Then the new stock I buy gives me a quick cut loss. But with markets that have normal pullbacks, I am allowed to separate the weak from the strong.
The only bad part is when one of those weak end up being a large position. Usually it does not happen, but it has happened a couple times recently which indicates to me I need to be more selective and careful with which stocks I pick to load up on. Besides stocks like MTRX and TTG, everything, pretty much, is acting just like it should be acting. Stocks moving higher, holding key support, and moving higher again. As long as top stocks, my stocks, and leading sector stocks keep acting like this it is silly to be calling market tops here. Especially with the NYSE short-interest ratio hitting ANOTHER all-time high at 7.82. Wow! They keep shorting this market despite the near new highs. Brave, I must say. Stupid, I must say.
I hear some people mention that there are too many bulls in the investors intelligence survey at 53% and too few bulls at 19% so we have to be near a top. What these people must not understand is that this survey is HORRIBLE at calling tops. It is ONLY useful at bottoms where normally bulls and bears cross around the 40-45% area. This happens to be good at correlating bottom with price in the indexes. As for tops? Are you kidding me. I guess anything to help there argument.
It doesn’t matter because I can come right back and say, “have you seen the realmoney.com poll this weekend?” So far, bears have 44% of the vote and bulls have only 31%. Last time I checked that doesn’t mean the crowd is bullish. Also have you seen the UBS sentiment index? It is NO WHERE NEAR euphoria levels. That index has a good track of indicating possible tops when the line hits the euphoria zone. It is not even close. The AAII is even close with 43% bullish and 33% bearish.
I hate to tell you this, bears. This is NOT what you see at tops. You do not see pessimism in the media and polls showing 70% of the public thinking we are in a recession, with NYSE short-interest at all-time highs and euphoria levels so absent from this market. Do you know what else is not out there, besides stocks in the Chemical-Fert group? Stocks in CLEAR end stages of climax runs. I can see some stocks in the middle of runs all over the place and I can clearly see that TNH and CF have gone nuts. But calling a top in these is not smart. These stocks still do not look like they are near a top, much less ready to rollover.
The action of GOOG, AAPL, CROX, RIMM, and other leading stocks are still rocking and are not in major climax runs. So it just seems hard for me to want to call a top when the leaders are still leading and some of them are almost closing near their highs on a day like today. If anything, JDSU in 2000 should be the case study for everyone. After that stock topped, it took SIX MONTHS before the big fall. Trust me, calling tops is a game of ignorance and pure idiocy. The right play is going with the trend. Something a TON of people reading this blog probably are NOT doing. You will see a MAJOR difference if you just learn how to do what the best traders of all-time did.
Are there reasons to pullback? Yes. We are getting overbought on all the oscillators I follow: ARMS index, 10-day moving average of the advance/decline line, and the McClellan. But at the same time I see that only 62% of all stocks in the market are above their 200 day moving average. I am not sure if that is bullish and means there is a lot of stocks waiting to join the run or if this index is confirming the overbought market. But I thought I would still give that fact, considering that in February 86% of all stocks were above the 200 dma. That market was overbought. This market might be overbought short-term but the 62% may signal that there is a lot of energy waiting to join the run.
If that is the case, that would be fine with me, only because I see the VIX ticking up a little. It would be nice to back and fill here, if it causes the VIX to rally over 20. That would help me make a lot more money on my longs that decide to follow-through. A 10% drop would even be better as a chance of VIX hitting 25 would definitely give me more volatility to make more money on stocks that are moving. Remember, a higher VIX gives you more potential for gains in stocks. This persistent low VIX does not allow for many stocks to make 200%-1000% runs in six to twelve months. A low VIX like we have now makes 100% winners spectacular. This is why a choppy market or an uptrend with some more 5% pullbacks would be nice. But with all the bearishness I have mentioned, LOL, along with another number I have left out–put/call is at .94–I doubt I am ever going to get my pullback.
Chances are when this market ends, it is going to unleash a horrible bear market. That would be OK also. That would allow me to short all the old leaders like TNH that have made 1000% plus gains since the rally started. Then after making some nice cash on shorts in the bear market, we will eventually get another bull market WITH A MUCH HIGHER VIX that will then give us a real great bull market to work with. The best time to make money is in markets like March 2003-January 2004. Those bull markets, after severe bear markets are what makes some traders careers.
Before I rap this up, I want to go over one more key component of this rally: the Semiconductor Index (SOX). Everyone always says that they don’t think bull markets are real bull markets unless the Semis are moving. The theory goes is that this is where the “hot” and “speculative” money goes for big returns in a bull market; when the semis are moving, the market is moving. Well now we have the Semis hitting new highs and the only question I have to ask is that: does it mean that the market is bullish now?
This scenario, after giving more thought to it, could run a two-way street. At first all I could think about is how bullish this is and now the perma-bears will have to figure out a crafty excuse to pooh-pooh this move in the Semis. Well they gave me a great argument on Friday. I took notice of the Relative Strength line of the Semiconductor index (SOX) and notice a very negative divergence developing. As price has continued to make a stairstep pattern of higher highs and lower lows, the RS line has actually failed to make new highs during any of the important moves in the SOX this year. Since the high in November, the index hit a series of highs in Jan, Feb, April, May, and Thursday. The problem if you look at your chart is that every RS high is lower.
So we can take this in, in two ways. One is that the market will continue to rally here, and now that the lagging SOX has caught up, the market will make a real more exponential move into new high ground. Or the SOX could be the sector that convinces the bears that this market is going to move higher and we suffer a fakeout-breakout. This would turn enough bears bullish to actually put in a possible top. Somehow, I think scenario one is correct, by simply looking at all my charts and the current situation of the market and leading stocks. But scenario two could happen also. We must NEVER rule ANY scenario out. That is smart trading.
On that note, enjoy your weekend and I will see you in the chat room. ALOHA!
top holdings up this week - purchase date
TRCR 432% - 1/12
MA 239% - 8/2
OMTR 162% - 9/15
IHS 136% - 12/21/05
TTEC 125% - 8/25
FTEK 123% - 10/6
MOS 121% - 10/12
MEH 114% - 8/30
CPA 114% - 9/15
MFW 111% - 1/29
HRZ 107% - 9/27
MCZ 106% - 3/27
DECK 101% - 9/13
CXW 93% - 5/19/06
PRGX 91% - 1/12
HURN 90% - 9/13
CNH 89% - 11/2
EVEP 85% - 11/16
ZNH 84% - 12/26
NTL 83% - 4/13
APLX 82% - 9/28
MVIS 80% - 12/21
VDSI 71% - 1/4
AFSI 69% - 4/12
LFL 66% - 12/13
VSNT 63% - 2/5
LTS 61% - 1/11
TESO 59% - 2/16
BMA 52% - 10/24
ETE 50% - 10/6
Market Commentary At Big Wave Trading Bronze Level One
New Swing Longs: Silver Level Two
New Swing Shorts: Silver Level Two
Stocks On My Watchlist: Gold Level Three
Complete Profits/Losses: Gold Level Three
Partial Profits/Losses: Gold Level Three
MauiTrader Forums: Gold Level Three
MauiTrader Chat Room: Gold Level Three
Longs Up On The Day: Gold Level Three
Shorts Up On The Day: Gold Level Three
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