Well, I guess, all I can say is, so much for that rally. There were a lot of people that were very confident that the lows in this market were seen on 1/22 and 1/23. Those people that believe that is the case still, are living in serious denial about the true problems this market has. Unless you are only focused on the oil, gold, steel, metal, food, ag, machinery, or chemical stocks, there is no way anyone can be serious when they say they are bullish on this market. Everywhere I look I see some big damage that was caused by today's selloff and the reality of the situation is very clear to me. This market is not a market to buy.
Today, stocks were crushed, as a raft of poor economic data and more subprime BS slammed the door in the face of the bottom-callers. Part of it was due to the consumer as for the third month in four their was no growth in spending. And for those that truly do not grasp how important that is, I hope I can help convince you, along with IBD, that it is indeed very important.
IBD echoes my feelings and they use 2001 as an example. If not for the spending habits of the consumer, there indeed is a high probability that we would not have rallied off that horrible time the way we did. We came back extremely strong and it might not have been that strong if not for the consumer. And after LTCM and the global crisis back in 1998, it was the consumer's spending, once again, that helped keep the economy going just enough to keep other sectors moving. If you want to know what it is like when people stop spending money, take a look at post-bubble Japan in the 1990s. This is a big deal and is just another piece of the puzzle that shows the economy is in a lot of trouble.
The bulls want to say that this is just a minor dip and that things will be better in the future. Realist look at that argument and immediately take a look at the books of the homebuilders and say "wait a minute." "This is just starting." Yes, in fact it is just starting. How do we know that? Easily. I call it common sense. Do you think the Fed is lowering rates because the economy is on fire? Do you think that when they are done the market is just going to say "thank you" and start running again?
Our GDP numbers have just started trending down and when you look at factory backlogs and activity it is almost impossible to say that this will correct in just a quarter or two. But on top of this poor GDP is the nasty PPI and CPI which show that we have real inflationary problems. With that inflation we have a big problem with jobs as joblessness is rising and wages earned is growing at its lowest level in a very long time. This is not the proper macro trend for our stock market. And all you have to do to confirm that the macro trend is not good is look at the stock market. A bullish market with a strong economy does not look like this. This is a market eerily similar to the late 1960s and early 1970s. For those that do not know their history, 1968-1980 was the equivalent of investor hell, as the DJIA moved -.22%. So basically it was twelve years of nothing.
However, not to fear, active investors, as many stocks made a lot of big gains during that time. If you backtest your charts of the DJIA you will see that there were some very serious trends back then that allowed us to make some good money on the long side (1968, 1970-1971, 1972, 1975, 1980) and good money on the short side (1969-1970, 1971, 1974, 1977). During these runs, many stocks, obviously produced some great gains. So if we are about ready to enter a period of stagflation or enter a recession, there should be plenty of shorts for us to profit off of. If you are too nervous to short or are too inexperienced, don't be shy about keeping those cash levels high. Most people, if they would have stayed in cash, during the past few months, would be sitting pretty with gains much larger than the market. I know a lot of people that have losses since the start of this year (like yours truly in 4 of 6 accounts) but the key is to see if you are beating the market.
A lot of people do not understand that just because you are down, does not mean you are a loser or a bad trader. If you are down 10% this year, you should not be upset. Instead you should realize that you are beating the Nasdaq by almost 5% and that makes you better off than well over 50% of investors out there. The best bet to do now is to make sure you stay locked in that cash. Let the mediocre stocks come flying by with their almost nice chart patterns that still fail in this choppy market anyways because 3 out of 4 stocks follow the general market. So if the market is going nowhere, chances are that your stock will not be going anywhere either, unless it is in one of the top 20 industry groups and only if that group has been climbing the list.
This is why I keep saying it is ok to be in cash. By going to cash, you can make sure you do not lose money while you learn how to trade and then when this crazy market is over and a new "real" uptrend starts instead of having $385,000 to try for that 1000% (which should be doable with 4 to 1 margin--study my 'past big winners!!') gain you will still have the original $500,000. And trust me more of you (like 99%) will end up with less money when you get out of this market environment.
Luckily for me, I still have a lot of short positions that did not signal any full sells while we had that very low volume drift higher. Those shorts piled it on thick today. Not only that, the longs that I own all pulled back on lower volume and still have nice chart pattterns--that is, of course, mostly the commodity stocks.
But there is a group of longs that I started to go long based on the strong fundamentals and charts. That is the medical stocks. However, after Friday, things have changed as HMSY, CMED, CHDX, and AMED all had to be fully sold today. This is kind of shocking, considering that medical stocks historically do well in bear markets. This along with the utilities falling in a bearish market environment has to be considered really bad.
I am not sure the reasons why these stocks are reversing. But what normally happens with stocks that everyone think should be going up but selloff on no news is that something bad is going on industry wide underneath but will not be known until much later. Taking those charts along with two popping into my head that I just saw (ELN XNPT) and I believe there is a deeper macro issue happening.
What I personally think might be happening here is one of two things, or both, or none. The medical stocks are selling off because consumers are so extended (130% in debt I recently saw) that they simple can not afford to frivolously use up their medical. Or it could be because the sector is looking ahead to a Barack Obama or Hillary Clinton winning and the taxes, trade barriers, and regulations that will be imposed on this industry, along with the insanity of the already-failed-in-Canada-and-England universal healthcare. No matter how you look at it, it is not good for this industry, and now the market appears to have recognized it.
Whatever the reason is the fact that these stocks are failing and reversing on strong volume and red BOP is very bearish. This leaves ONLY commodity related stocks that are moving up and to me that is scary. They are moving higher because it is obvious there is too much money chasing too few goods. This along with the horrible regime of Mugabe in Zimbabwe has helped to spur what could be 100,000% inflation by the end of 2008. But his is also impacting us here as corn is used for the ridiculous wasteful and "carbon emitting" ethanol fuel. This then effects the food chain and line. Combine this with some bad weather here and there and you get some real problems. Hence, all our great looking commodity charts and ugly everything else. There seems to be no end to higher prices in sight and the charts while going "exponential" are no where near at the end of a parabolic run.
Helene Meisler recently penned a piece suggesting they were parabolic. Well, my fellow colleague (who lives in St. Louis, where I was born; I think I got the better end of the deal ;)) Helene did not look at enough charts and if she would have overlaid the current ETFs over other parabolic runs she could see they are just starting. Fortunately, I am not the one that has to tell her this as Manning was immediately on top of this including his own conversation with Jim Rogers.
Jim believes we are only 1/2 way through this run and if it started in 1999 will last until about 2018. So take that for what it is. Jim is also short MSFT and so am I. So if the guy is long what I am long and is short what I am short, who am I to argue with the man. The only amazing thing is that Manning can talk to Jim. LOL. I don't even think Jim would look at someone like me. Which is fine with me, by the way. I prefer to be the outsider looking in.
My returns with this CANSLIM system sure does prove that. These "professionals" couldn't even touch my subscribers with their money. For proof of that, Cramer's Action Alert Plus has an unbelievably pathetic 30% return since 1/1/02. Now I know that is wrong to say something like that and I do apologize for being a jerk. The truth is that he should have doubled his money. Look at the IBD 100, look at the IBD 85-85, look at the returns from the AAII screen that runs the CANSLIM system, look at Ken Heebner, and look at me, axman, market, and wutan (and many others). 30% is terrible. Yet I am sure for those that ONLY watch Cramer on CNBC, it is incredible. Not good.
Now, I will admit, I do not have the money Cramer has, but I lived in Manhattan and Manhattan prices have nothing on West Side Maui prices. Everything I earn almost goes into my cost of living, so it is going to be hard to be worth what Cramer is worth now. But when I am as old as Cramer is, trust me, my Action Alert portfolio will be doing a lot better than his. Mark my words, mark my 'past big winners.' The only ways it couldn't be is if we never have another bull market ever again or if we are nuked. Either way I am screwed and at least I know how to surf. If there is no stock market, at least there might be waves. If there are no waves, there is still plenty to do in the ocean.
Getting back to this market, I want to go over some internal numbers that caught my attention today. First off, besides the NYSE and SP 600 which only barely made it over the 50 DMA, the rest of the indexes spent five weeks basing BELOW this key moving average and that combined with today's crack on 20% higher volume is bearish. On top of that, new lows killed new highs by a wide margin of 39 new highs to 360 new lows. This is not what you see if the pullback was just a normal pullback in a market that had in fact bottomed. If that was the case we would have seen the new lows stay around the number of new highs since they were close the past few days. This expansion confirms the weakness.
Now, there are a couple of things that indicate there was some fear in this selling. This can be seen in the VIX that jumped 11% to 26.50 which is a good pop but still a weak reading as it is still almost 100% away from the 50 needed to signal a GREAT BOTTOM. On top of the VIX, the put/call ratio jumped to 1.21 which indicates there was a good little amount of fear in the market today. However, with the put/call, big jumps usually don't matter unless the stock makes a big move lower and then puts in a very bullish intraday reversal closing higher. The near 3% move just is not enough to signal a day full of capitulation. So 1.21 is just not high enough. When we see another day similar to August 16th, along with the put/call hitting 1.5, then I may declare a bottom.
For now, however, without an extremely high VIX around 40-50, a put/call around 1.5, or the investors intelligence showing more bears than bulls, there is simply no way I can believe 1/22 and 1/23 are bottoms and today's swoon along with all the ugly stock charts and fresh breakdowns signals to me to be ready for new lows. If that happens, I guess the bottom callers will give it another shot. They sure do think we are going to forget that they keep calling these out. They will continue to be wrong, until you do not hear any more bottom calls.
Once you stop hearing those bottom callers and start seeing more SWIR EGHT USNA EPIC EVOL TASR FMDAY DITC FLML SIGM MOBE from 2003, IST (MT) from 2004, LMLP LPTH MRVC PARD CAMP NEWP CRGN from 1999, HRZ from 2006, AFSI from 2007 and maybe, just maybe, CMP in about five weeks. It would need to continue to move sideways on low volume (with maybe a few big accumulation days in between) and max green BOP. If it could do that we might have our first "HOT" chart since APPY on September 19th and 21st (was too speculative to load up).
But if we continue to selloff and we do not see those pretty charts setting up then what I will be doing will be the same thing I was doing shortly after this market topped. And that is shorting stocks of these high priced ex-leaders that are clearly breaking down. Right now, almost every single stock that I am monitoring as a short is no where near being in a position to short. Most still are not close enough to the 50 and 200 day moving average to warrant any big short position.
Recently, I have been very lucky and two stocks have setup in good short positions two days in a row. What makes this even better is that I was already long these stocks going into Thursday's session. Those that are silver to platinum know which two I am talking about and if you study those charts you will see two stock that have done everything right when it comes to being a good short position. It has topped, broken down on huge volume through key moving averages, rallied on lower volume back to the moving averages, and breaks down again on strong volume. To go along with that I like to see red BOP throughout the chart and see the RS line making new lows before price.
If I continue to find charts that are red and setup like this, instead of the usual "green" subjects, I will obviously be focusing on the short side and not the long side. However, right here, there are not a lot of stocks setup right as many are either down too much already or the stock did not rally back far enough to key resistance or the moving averages. So right here, you are basically still in no man's land as it is hard to short and hard to go long.
Now, with all of this being said this weekend from me, it is probably obvious that I am very bullish on commodities (via the charts) and very bearish on the economy (via the charts and macro data). And even though I know we have not seen any real fear with the VIX failing to hit 40-50 and the put/call refusing to print a ridiculously high number, I do not deny the fact that we could see the lows shortly, if indeed this is just a minor blip in the world economy and not a major setback that will take years to fix.
If that is the case, and the market puts in a powerful follow-through day on huge volume (which it NEVER did off the 1/22 reversal), then my short side bias will obviously drop. It will drop further if I can find some more charts that are looking like CMP and SWC. You already know about CMP, but if SWC can chill-out for five to seven months and create a nice quiet base, just like CMP, SWC could easily be a huge winner. It has already built a right side of a base on mostly green BOP running up almost 150%. If it can build a high tight flag, flat base, or another base on top of it, I would be very bullish on this stock. And if I see more stocks like these then I will be very happy. The last thing that would have to happen to get me fully bullish would be for the remaining shorts to have an extremely bullish day (basically following-through off the lows) that lets me know that the easy gains are over.
I have no problem with being a bull here, but to do that I will need reasons to be. I am not just going to be a bull for the sake of being one. I don't need to call a bottom. I don't have to impress anyone, my accounts give me enough feedback that tell me all I need to know about what being a bull is all about here: ignorant pain. That is unless you are long the commodities. But besides the gems, there is nothing out there with "hot" chart patterns that are slowly and steadily climbing the 50 DMA and 200 DMA higher.
When I have proof and reasons to be bullish I will be bullish. Give me a high VIX, more bears than bulls in the investors intelligence survey, a high put/call ratio, a stock market follow-through day with a HUGE price and volume gain, and a couple of handfuls minimum of stocks that look like my 'past big winners' and how CMP is starting out and I will be more than happy to come down with a case of "irrational exuberance."
Until that happens, chances are very low that you are going to get any kind of rally that has any kind of legs. Yes, we have the commodities moving but unless you are experienced and know how to hold through some volatile trending there is not going to be a lot of gains to be had by nervous traders who sell on any sign of weakness. There are sure to be some volatile movements in these stock prices if they continue to rally.
The best thing I can advise, once again, is that everyone keeps their trades very small, if you have to even trade at all. Keep the cash levels in your account very heavy. If you are experienced with the short side, then by all means take some of your favorites that are setting up in proper short positions short. If you are a newbie and you have not established a consistent long-term track record of making money on the long side, then please heed this advice and go to cash. Your account will thank you. It will be difference of starting the next bull market run, that could produce for you a 10,000% gain if you buy the next NTES, SOHU, and SINA and get those 2,500% returns in a year, with all of your starting equity (let's say $500,000) or just some of your equity (let's say after a year of trying to trade this market you are left with $390,000). $500,000 x a 10,000% return, versus $390,000 x a 10,000% return, is a much better way to start a new bull market.
What most fail to realize is that the chances of you losing money in this market is at least 75%, since three out of four stocks follow the general trend of the market. And that is why for one last time I am asking that newbies please keep their cash levels high here so that when the next trending higher, heavy accumulation, max green BOP, perfect fundamentals stock comes along you will have all of your money to put into it instead of some.
Most traders are churning their accounts slightly lower here. Including yours truly as I have some accounts down for the year. However, being down 1%-5% is A LOT better than being down 15% like the Nasdaq is near. There are a lot of bear market where some sectors do extremely well. That sector, for us, is commodities. Besides maybe poking a few tiny longs here and there, please keep that cash level high, so that when the next 1998 or 2002 bottom occurs, you will know that it is time to start looking and to start actively investing on margin.
I hope you all had a great week and that Friday did not get any of you leaning too heavily one way or the other. If you got caught, at least you can't blame me. In my RealMoney columns and on this bronze commentary, over and over, I have advocated new active investors to raise cash. If you are listening to what I am writing, then you are sitting pretty and should be very excited for when that next bull market comes. I know all I have to do is stair at my 'past big winners' for a little while and the joy and passion I had during those times hits me like a great acid flashback (is there such a thing?).
Have a great weekend, don't forget to read my RM column. It was posted late due to internal website problems. Aloha and I will see you in the chat room where it is always a bull market somewhere. SURFS UP!!
top current longs (shorts) and their returns since purchase: EBIX 130% CCC 95% MCF 109% PTEC 109% RICK 85% CPHD 81% IHS 227% AUXL 83% MA 281% (CBEY 56% GRMN 36% GS 21% AAPL 30% GOOG 28% BEN 23% ATI 22% CLP 24% COH 27% MSTR 30% SGMS 39% RYAAY 25% SHOO 37% PSYS 21% TSRA 35% LFC 32% ASF 29% MI 31% FTEK 20% HIG 22% ING 21% PRU 21% PVH 23% LVS 26%)
Showing posts with label protect capital. Show all posts
Showing posts with label protect capital. Show all posts
Saturday, March 01, 2008
Monday, January 21, 2008
Worst Week For Stocks In I Believe Five Years Leaves Behind A Wasteland Of Broken Charts
January 19, 2008
There is no other way to describe what happened this week as anything other than a major breakdown in all the major market indexes. The worst part (if you are a natural bull) is that the breakdowns now have every single major index with the 50 day moving average below the 200 day moving average. The Nasdaq was the last index to accomplish this “death cross” feat.
To make the declines this week worse, the averages sold off on heavier volume, with volume Wednesday, Thursday, and Friday on the Nasdaq reaching levels we have not seen since the mid-August sell off. The indexes are under major distribution by large institutional investors and there is no way with this amount of slow distribution (instead of a one day crash) is going to be followed, right away, by large amounts of accumulation. This market has cracked and broken wide open.
For those of you who are still bullish out there, it has to be due to ONLY one reason: you are a complete neophyte to the stock market. There can’t possibly be ANYONE who has been involved with the stock market for over a year that wants to load up on stocks here–that is except Doug Kass, my fellow colleague at RealMoney, who wants to load up on stocks here. Is he an idiot or what? This guy has been a hardcore! bear for over two years missing out on a TON of good gains (like MOS and TNH) all the while screaming about the upcoming recession. Now FINALLY he is right and he is now bullish? If there is anyone who you should probably NOT listen to about the stock market it is Doug Kass. The guy is brilliant at finding great short candidates but when it comes to the market he is about as in tune as WillPS (I love you Will, you have to realize this is for your own good but I really do want to see you succeed which is why you are being mentioned so much!!).
Something that I think bears much more hardships for the market is the way it reacted to the news by President George W. Bush. He announces a stimulus plan the size of $150 billion which is 1% of the GDP and the market takes its gains and turns it on its head leading us to close lower on the day? That is definitely a market I want to stay away from. There is no way news like this should have been received the way it was. It is a clear sign that ANY good news, besides bad news, is going to be sold.
Bush’s tax cuts in 2003 helped launch one of the most resilient bull markets we have ever seen. However, now, the market only laughs and instead of rewarding the stimulus package just says “sorry, nothing you do is going to save you from this.” This market has topped and if you need any more proof than this and your dwindling capital in your trading/investing accounts, you have some serious psychological problems and need to probably A) start reading all the books in my book list B) stop trading for now or C) stop trading forever.
Another thing I keep hearing from the foolish newbie crowd or the gambling buy-and-hold crowd is that these winners are going to come back as they are at “bargain” levels. What these dolts refuse to see is that this is the same BS we heard just seven years ago. Where in the heck are their brains or their history books. Have they not learned their lesson or not learned the lesson of history?
I remember clearly in 2000 how every single dip in YHOO EBAY MSFT CSCO QCOM JDSU AMZN was a “bargain” to be bought for the huge gains that would be coming again. Why don’t some of you go check your long-term weekly charts and tell me how those stocks rebounded. Then I want you to do a % return scan on your charting softwares and see how many stocks in each year went up over 100%. As you would see, if you actually did this exercise, there were a TON. By buying the bargains you prevent yourself from buying the next big winner. By the way, how is TASR and TZOO doing. I remember how AFTER the stocks topped how everyone said every pullback was a bargain. Wasn’t there even a TASR ticker on CNBC at the end? I could be wrong but for some odd reason I thought there was. I was playing more poker than watching CNBC that year.
By the summer, we will probably be up-to-date on most of my past big winners with HOT charts in my ‘past big winners’ section. Once it is updated, you will quickly learn that most of my big winners were fresh brand new stocks that almost no one has ever heard of. JUST LIKE CANSLIM TEACHES US. And those gains in those stocks NEVER had severe selloffs from climax runs like many stocks this year have. There are climax runs everywhere and almost 99% of those stocks will NEVER come back to be a huge winner. The bottom line: You are NEVER going to find a RIMM, GOOG, BIDU, or FSLR after they have already had one huge bull market. The exception, you might say, is AAPL. But technically Jobs rebuilt that company and turned it into a NEW COMPANY. The IPO was basically in 2001 and by 2004 we had one of the best stocks of the five year bull market setup and break out of a beautiful base. Sadly I only received 200% of this 1000% gem.
So now that I have convinced you–probably not the newbies but you know what I can’t care when their ignorance blinds them from the truth–that you can not buy the next big stock market leader from a group that was once part of the last big bull market, maybe that can convince some of you to stop trying to buy the stupid dips in stocks like DRYS, MOS, IHS, MA, and GOOG and instead to start looking at rallies as places to short.
Even if we put in an oversold rally that last for months (just like the rally in 2000, early 2001, after 9/11, and the small one in the summer of 202), there will be chances to make money on the green charts, like FFH, in select defensive stocks like Medical and Food stocks. And even right now Medical stocks are good areas to go long as 10 of the top 20 industries based on six-month price performance in IBD are Medical groups. Quite an impressive showing for a sector! But with the rally in Medical stocks, the losers that have topped will also rally. Those are the stocks you must not get fooled into buying back, thinking you got a “bargain” or a “value.” Those are the stocks the talking heads on CNBC want YOU to buy so that the smart money can unload on your not-so-smart behind. Why people keep falling for it is beyond me. But when you don’t take the time to learn about either politics or the economy, you deserve what you get. You fall for the BS, you deserve the punishment. Being “ignorantly bliss” is the equivalent to a horrible disease. I know I don’t want to get infected by it.
As long as you newbies can not fall for the crap you hear on CNBC and learn that REMEMBER!!! we buy new 52-week highs, NOT LOWS, then you will save yourself a lot of pain. If you ignore my market battled-and-tested warnings you will pay for it dearly when the market finally has enough of you. It will chew you up and spit you out.
Recently, I must admit, I have hit a major funk of depression, just as I have been asked to work for RM. Thankfully, that gig is working out but for the past three months I have been in a trading funk UNLIKE ANY TIME SINCE MY FIRST MONTHS OF TRADING. I was blessed to learn the CANSLIM strategy first and it IMMEDIATELY made sense to me so I was blessed in that market environment. I could do no wrong and I lost enough money in the 97 and 98 pullback that by the time the 2000 top came I already knew how to protect gains. Not only that but my shorting worked perfectly in 2000. But what I keep forgetting is that from April to August I did have a rough time as I was only going long stocks again and while I got a few winners (go check the past winners section) on about 70% of what I bought I was cut out of rather fast and with decent losses. But the trend turned back down and I went back to shorting which at the time could do you no wrong.
The one difference from then and now is that I keep loading up on the wrong stocks. These exact same perfect setups or really strong setups has worked for me for twelve years but now all of a sudden I can’t get anything I buy in bulk to work. My last large trade was AFSI which I still only put 5% of my account in after a teaser buy of 1% of my account. 6% is not a big position. The last time I went to 10% of one was HRZ in late 2006. That pattern is the one you should burn into your head. That HRZ pattern simply does not get any better than that and the next time I find one like that 20% of my account will go in it. But if that pattern showed up tomorrow, I probably would not buy 20% of it.
For the first time that I can remember, I am having my third straight month of horrible performance. Now, by horrible, I know me and you have two different definitions. You might think horrible is losing 20% while the market lost 10%. Well, this year the market has lost almost 12% by the Nasdaq while I am down 4% on the year. Now I know some of you must not understand how that can be when I have these kind of gains in short positions: (FAF 28% FRT 20% CLP 32% ASF 25% FDX 23% ESI 20% XLNX 24% COH 40% MI 35% FTEK 30% MSM 26% HUBG 21% PVH 27% ATI 34% LVS 34% MSTR 26% CBEY 22% RNT 33% SGMS 46% BEN 28% MHGC 21%-in-four-days). But the matter of the fact is that I did not consider any of these to be fully perfect shorts so I did not load up on any of them. What have I loaded up on? Well I will tell you one perfect short setup that failed (AMX) while keeping the rest secret to this section as I have become paranoid that if I talk about them they will go the wrong way. However, AMX perfect setup on 1/2 failed on 1/10 but immediately freaking rolled over becoming a candidate on 1/15. Of course I passed again and now it is down almost 7% since then.
Then we have FFH long. I was long that stock but at the start of the year it took me out. Now look at it!! Another perfect move over the 50 day moving average (not a perfect setup–don’t get that confused). So, once again, I have been whipped. The bottom line is that things are not going well in my trading and it seems that if the pattern is extremely nice (and I am sure no one else has their charts like mine that have millions and millions) and near-perfect to perfect it fails. And if the pattern is good to really good then it acts like the stock was perfect. I think that if this was a bull market now and HRZ setup in its 2006 pattern, it would fail. So my psychology is off. I know how to fix it and it is to step away but I can’t do that so instead am going to keep everything small until I can load up my shorts in GOOG RIMM AAPL BIDU FSLR MOS TNH etc when they setup in their perfect short setups. If you don’t know what they are….BUY THE BOOK HOW TO MAKE MONEY SELLING STOCKS SHORT by WILLIAM J ONEIL. The two books he has written on the markets, if you read them slowly or read them a LOT, will completely change your life and make you a stud when it comes to trading stocks.
When it comes to trading futures, don’t ask me. Ask David, in our chat room. I do not have a lot of interest and I believe that he is beyond qualified to teach you this professional technique. If you are a newbie and can not even make money going long stocks, don’t you dare think about trying futures. It is much harder than trading stocks. It moves a lot faster and has much higher risk as you can borrow a lot of money for a little money.
Is there anything that makes me think we are going to put in a real bottom any time soon? LOLOLOL. Are you crazy?
Is there anything that makes me think we could put in an oversold rally on the short-term. Absolutely and the first thing that excites me is that the VIX is finally moving. The fact that it has just started moving higher is probably not good for finding a low just yet. But a little more of a rise in the VIX to the August highs could lead us to an oversold rally. But hopefully it will not last long because we need to really wash this market out of weak hands and set up and start the process of stocks building nice long max green BOP filled bases. These beautiful long term bases are what leads to market like 2003.
This market is way too far down right now to have a 1999 type rally but that market had shallower bases but the stocks that were momentum favorites and in top industries pulled back on no volume with BOP staying max green or just green. Do you see any max green BOP filled stocks that trade over 100k a day and are over $10 a share? Nope. Do you see any that are pulling back into nice tight bases, besides Medical stocks and FFH? nope.
Chances are that this is going to be a very long drawn out bear market that is sprinkled with a recession on top. You better take those bull goggles off amateurs. You are hearing this from someone WHO WAS A BULL FROM THE OCTOBER 2002 RALLY TO THE NOVEMBER 2007 TOP. DURING THE PULLBACKS IN 2005 AND 2006 WHEN EVERYONE WAS CALLING A TOP I CONTINUED TO NOT CALL A TOP BECAUSE HOT GREEN TO MAX GREEN FILLED CHARTS EXISTED. In 2007, I was premature a couple of times, but as soon as the lows and a follow-through day were printed I immediately turned and helped you make money on stocks like TESO AFSI DRYS FSLR, and APPY to name just a small amount. When November’s selling came, I saw something very different. And I still see this now. No green and all red. This is going to take a long time to fix.
Aloha and I will see you in the chat room where hopefully I can get over my small losses and realize that I am still beating the market by a significant amount. Even though all of you are crushing me. I still feel like a loser and I am still upset over it but don’t think for ONE SECOND that I am not completely stoked and happy for you all. I am so proud of all of you that are making money in this market. I remember the 2000 market and the whole situation like it was yesterday. I remember watching $500k turn into $11k in some peoples accounts as they bought every dip and refused to short the rallies. I am so proud of you all (not you WIllPS…yet) and continue to wish you all the best in trading. I hope I can make you all filthy rich and as a byproduct I pray my trading turns around and the next HRZ, TASR, or even FMDAY (2006,2003,and 2004) will blast off to the sky just like they did last time and that my confidence will be up to the point that I can put 25% in each of these bad boys. I am in a major funk but am only down 1% from the November highs while the market is down 18%.
It is very disappointing to have this run but preserving chash ALWAYS KEEPS YOU IN THE GAME TO FIND THE NEXT TASR OR LMLP (1999). Once again, aloha!
There is no other way to describe what happened this week as anything other than a major breakdown in all the major market indexes. The worst part (if you are a natural bull) is that the breakdowns now have every single major index with the 50 day moving average below the 200 day moving average. The Nasdaq was the last index to accomplish this “death cross” feat.
To make the declines this week worse, the averages sold off on heavier volume, with volume Wednesday, Thursday, and Friday on the Nasdaq reaching levels we have not seen since the mid-August sell off. The indexes are under major distribution by large institutional investors and there is no way with this amount of slow distribution (instead of a one day crash) is going to be followed, right away, by large amounts of accumulation. This market has cracked and broken wide open.
For those of you who are still bullish out there, it has to be due to ONLY one reason: you are a complete neophyte to the stock market. There can’t possibly be ANYONE who has been involved with the stock market for over a year that wants to load up on stocks here–that is except Doug Kass, my fellow colleague at RealMoney, who wants to load up on stocks here. Is he an idiot or what? This guy has been a hardcore! bear for over two years missing out on a TON of good gains (like MOS and TNH) all the while screaming about the upcoming recession. Now FINALLY he is right and he is now bullish? If there is anyone who you should probably NOT listen to about the stock market it is Doug Kass. The guy is brilliant at finding great short candidates but when it comes to the market he is about as in tune as WillPS (I love you Will, you have to realize this is for your own good but I really do want to see you succeed which is why you are being mentioned so much!!).
Something that I think bears much more hardships for the market is the way it reacted to the news by President George W. Bush. He announces a stimulus plan the size of $150 billion which is 1% of the GDP and the market takes its gains and turns it on its head leading us to close lower on the day? That is definitely a market I want to stay away from. There is no way news like this should have been received the way it was. It is a clear sign that ANY good news, besides bad news, is going to be sold.
Bush’s tax cuts in 2003 helped launch one of the most resilient bull markets we have ever seen. However, now, the market only laughs and instead of rewarding the stimulus package just says “sorry, nothing you do is going to save you from this.” This market has topped and if you need any more proof than this and your dwindling capital in your trading/investing accounts, you have some serious psychological problems and need to probably A) start reading all the books in my book list B) stop trading for now or C) stop trading forever.
Another thing I keep hearing from the foolish newbie crowd or the gambling buy-and-hold crowd is that these winners are going to come back as they are at “bargain” levels. What these dolts refuse to see is that this is the same BS we heard just seven years ago. Where in the heck are their brains or their history books. Have they not learned their lesson or not learned the lesson of history?
I remember clearly in 2000 how every single dip in YHOO EBAY MSFT CSCO QCOM JDSU AMZN was a “bargain” to be bought for the huge gains that would be coming again. Why don’t some of you go check your long-term weekly charts and tell me how those stocks rebounded. Then I want you to do a % return scan on your charting softwares and see how many stocks in each year went up over 100%. As you would see, if you actually did this exercise, there were a TON. By buying the bargains you prevent yourself from buying the next big winner. By the way, how is TASR and TZOO doing. I remember how AFTER the stocks topped how everyone said every pullback was a bargain. Wasn’t there even a TASR ticker on CNBC at the end? I could be wrong but for some odd reason I thought there was. I was playing more poker than watching CNBC that year.
By the summer, we will probably be up-to-date on most of my past big winners with HOT charts in my ‘past big winners’ section. Once it is updated, you will quickly learn that most of my big winners were fresh brand new stocks that almost no one has ever heard of. JUST LIKE CANSLIM TEACHES US. And those gains in those stocks NEVER had severe selloffs from climax runs like many stocks this year have. There are climax runs everywhere and almost 99% of those stocks will NEVER come back to be a huge winner. The bottom line: You are NEVER going to find a RIMM, GOOG, BIDU, or FSLR after they have already had one huge bull market. The exception, you might say, is AAPL. But technically Jobs rebuilt that company and turned it into a NEW COMPANY. The IPO was basically in 2001 and by 2004 we had one of the best stocks of the five year bull market setup and break out of a beautiful base. Sadly I only received 200% of this 1000% gem.
So now that I have convinced you–probably not the newbies but you know what I can’t care when their ignorance blinds them from the truth–that you can not buy the next big stock market leader from a group that was once part of the last big bull market, maybe that can convince some of you to stop trying to buy the stupid dips in stocks like DRYS, MOS, IHS, MA, and GOOG and instead to start looking at rallies as places to short.
Even if we put in an oversold rally that last for months (just like the rally in 2000, early 2001, after 9/11, and the small one in the summer of 202), there will be chances to make money on the green charts, like FFH, in select defensive stocks like Medical and Food stocks. And even right now Medical stocks are good areas to go long as 10 of the top 20 industries based on six-month price performance in IBD are Medical groups. Quite an impressive showing for a sector! But with the rally in Medical stocks, the losers that have topped will also rally. Those are the stocks you must not get fooled into buying back, thinking you got a “bargain” or a “value.” Those are the stocks the talking heads on CNBC want YOU to buy so that the smart money can unload on your not-so-smart behind. Why people keep falling for it is beyond me. But when you don’t take the time to learn about either politics or the economy, you deserve what you get. You fall for the BS, you deserve the punishment. Being “ignorantly bliss” is the equivalent to a horrible disease. I know I don’t want to get infected by it.
As long as you newbies can not fall for the crap you hear on CNBC and learn that REMEMBER!!! we buy new 52-week highs, NOT LOWS, then you will save yourself a lot of pain. If you ignore my market battled-and-tested warnings you will pay for it dearly when the market finally has enough of you. It will chew you up and spit you out.
Recently, I must admit, I have hit a major funk of depression, just as I have been asked to work for RM. Thankfully, that gig is working out but for the past three months I have been in a trading funk UNLIKE ANY TIME SINCE MY FIRST MONTHS OF TRADING. I was blessed to learn the CANSLIM strategy first and it IMMEDIATELY made sense to me so I was blessed in that market environment. I could do no wrong and I lost enough money in the 97 and 98 pullback that by the time the 2000 top came I already knew how to protect gains. Not only that but my shorting worked perfectly in 2000. But what I keep forgetting is that from April to August I did have a rough time as I was only going long stocks again and while I got a few winners (go check the past winners section) on about 70% of what I bought I was cut out of rather fast and with decent losses. But the trend turned back down and I went back to shorting which at the time could do you no wrong.
The one difference from then and now is that I keep loading up on the wrong stocks. These exact same perfect setups or really strong setups has worked for me for twelve years but now all of a sudden I can’t get anything I buy in bulk to work. My last large trade was AFSI which I still only put 5% of my account in after a teaser buy of 1% of my account. 6% is not a big position. The last time I went to 10% of one was HRZ in late 2006. That pattern is the one you should burn into your head. That HRZ pattern simply does not get any better than that and the next time I find one like that 20% of my account will go in it. But if that pattern showed up tomorrow, I probably would not buy 20% of it.
For the first time that I can remember, I am having my third straight month of horrible performance. Now, by horrible, I know me and you have two different definitions. You might think horrible is losing 20% while the market lost 10%. Well, this year the market has lost almost 12% by the Nasdaq while I am down 4% on the year. Now I know some of you must not understand how that can be when I have these kind of gains in short positions: (FAF 28% FRT 20% CLP 32% ASF 25% FDX 23% ESI 20% XLNX 24% COH 40% MI 35% FTEK 30% MSM 26% HUBG 21% PVH 27% ATI 34% LVS 34% MSTR 26% CBEY 22% RNT 33% SGMS 46% BEN 28% MHGC 21%-in-four-days). But the matter of the fact is that I did not consider any of these to be fully perfect shorts so I did not load up on any of them. What have I loaded up on? Well I will tell you one perfect short setup that failed (AMX) while keeping the rest secret to this section as I have become paranoid that if I talk about them they will go the wrong way. However, AMX perfect setup on 1/2 failed on 1/10 but immediately freaking rolled over becoming a candidate on 1/15. Of course I passed again and now it is down almost 7% since then.
Then we have FFH long. I was long that stock but at the start of the year it took me out. Now look at it!! Another perfect move over the 50 day moving average (not a perfect setup–don’t get that confused). So, once again, I have been whipped. The bottom line is that things are not going well in my trading and it seems that if the pattern is extremely nice (and I am sure no one else has their charts like mine that have millions and millions) and near-perfect to perfect it fails. And if the pattern is good to really good then it acts like the stock was perfect. I think that if this was a bull market now and HRZ setup in its 2006 pattern, it would fail. So my psychology is off. I know how to fix it and it is to step away but I can’t do that so instead am going to keep everything small until I can load up my shorts in GOOG RIMM AAPL BIDU FSLR MOS TNH etc when they setup in their perfect short setups. If you don’t know what they are….BUY THE BOOK HOW TO MAKE MONEY SELLING STOCKS SHORT by WILLIAM J ONEIL. The two books he has written on the markets, if you read them slowly or read them a LOT, will completely change your life and make you a stud when it comes to trading stocks.
When it comes to trading futures, don’t ask me. Ask David, in our chat room. I do not have a lot of interest and I believe that he is beyond qualified to teach you this professional technique. If you are a newbie and can not even make money going long stocks, don’t you dare think about trying futures. It is much harder than trading stocks. It moves a lot faster and has much higher risk as you can borrow a lot of money for a little money.
Is there anything that makes me think we are going to put in a real bottom any time soon? LOLOLOL. Are you crazy?
Is there anything that makes me think we could put in an oversold rally on the short-term. Absolutely and the first thing that excites me is that the VIX is finally moving. The fact that it has just started moving higher is probably not good for finding a low just yet. But a little more of a rise in the VIX to the August highs could lead us to an oversold rally. But hopefully it will not last long because we need to really wash this market out of weak hands and set up and start the process of stocks building nice long max green BOP filled bases. These beautiful long term bases are what leads to market like 2003.
This market is way too far down right now to have a 1999 type rally but that market had shallower bases but the stocks that were momentum favorites and in top industries pulled back on no volume with BOP staying max green or just green. Do you see any max green BOP filled stocks that trade over 100k a day and are over $10 a share? Nope. Do you see any that are pulling back into nice tight bases, besides Medical stocks and FFH? nope.
Chances are that this is going to be a very long drawn out bear market that is sprinkled with a recession on top. You better take those bull goggles off amateurs. You are hearing this from someone WHO WAS A BULL FROM THE OCTOBER 2002 RALLY TO THE NOVEMBER 2007 TOP. DURING THE PULLBACKS IN 2005 AND 2006 WHEN EVERYONE WAS CALLING A TOP I CONTINUED TO NOT CALL A TOP BECAUSE HOT GREEN TO MAX GREEN FILLED CHARTS EXISTED. In 2007, I was premature a couple of times, but as soon as the lows and a follow-through day were printed I immediately turned and helped you make money on stocks like TESO AFSI DRYS FSLR, and APPY to name just a small amount. When November’s selling came, I saw something very different. And I still see this now. No green and all red. This is going to take a long time to fix.
Aloha and I will see you in the chat room where hopefully I can get over my small losses and realize that I am still beating the market by a significant amount. Even though all of you are crushing me. I still feel like a loser and I am still upset over it but don’t think for ONE SECOND that I am not completely stoked and happy for you all. I am so proud of all of you that are making money in this market. I remember the 2000 market and the whole situation like it was yesterday. I remember watching $500k turn into $11k in some peoples accounts as they bought every dip and refused to short the rallies. I am so proud of you all (not you WIllPS…yet) and continue to wish you all the best in trading. I hope I can make you all filthy rich and as a byproduct I pray my trading turns around and the next HRZ, TASR, or even FMDAY (2006,2003,and 2004) will blast off to the sky just like they did last time and that my confidence will be up to the point that I can put 25% in each of these bad boys. I am in a major funk but am only down 1% from the November highs while the market is down 18%.
It is very disappointing to have this run but preserving chash ALWAYS KEEPS YOU IN THE GAME TO FIND THE NEXT TASR OR LMLP (1999). Once again, aloha!
Subscribe to:
Posts (Atom)