There is no doubt that I am suffering my WORST Multiple Sclerosis attack to date. Since Saturday I have basically been bed ridden and RIGHT OFF THE BAT I want to apologies if any of this is a little hard to follow because I feel like trash. I am not sure if this will effect what I am about to write but do me a favor and do NOT bust my balls if I misplace a word or misspell a word. My life is too short to deal with this.
I had a completely different approach in mind when I first wanted to write this but I figure I will stick with the facts. The facts are as quickly as this market looked like good times could be returning it in fact was possibly throwing us false "all clear" signal. Now while I never fully bought into this rally due to the volume, I still held hope that the rotation that I started to see into technology stocks would continue. Now I am beginning to wonder if that is what is happening or if they are making it appear that this was the case just to shut the door in our face.
At the end of last week things were looking very strong for the stock market, despite the low volume, as a lot of stocks that were in our portfolios were producing some large gains. But without ANY warning or clear reversal signal, the stocks started pulling back slowly getting rid of all the gains. The lucky part is that we did sell SOME as they pulled back since volume was higher. But the stocks pulling back on low volume and green BOP gave us no reason to sell. Since stocks that move up 20% in two weeks should always be held for at least eight-weeks it seemed stupid to sell anything pulling back. However, now it appears we should have taken more gains. This is the one time not taking profits quickly hurt us. The low volume was the tell and I should understand that next time as this is nto the first time I have witnessed this action.
If volume would have been much higher on the Nasdaq and NYSE then I am almost for sure some of the stocks we lost a lot of our profits on would be flying. But low volume rallies are always dangerous if for no other reason that what happened the past four days in the market. The nasty action is most noticeable in the DJIA as you can see it trying to breakout through the 200 day moving average, failing, and then breaking down through the 50 day moving average. This gave it a 3.9% decline on the week which was by far the worst of the indexes.
However, the Nassy fell 3.3%, the 500 fell 3.5%, the NYSE fell 3%, and the IBD 100 did not show any positive divergence with a 3.4% loss. There is no way to spin ANY of this. Last week was a very bad week, considering the week before the market appeared to be ready to give us a bullish rotation into leading tech, retail, and some homebuilding stocks. Too bad that was was killed this week.
The big news of the day was the BUD takeover bid that bid the stock up 8% but overall the biggest economic news came from the fact that the backlog of unsold homes hit a 23 year high! This is just shocking and if you think about how much equity exist due to the housing bubble it should come as no surprise that money is not moving anywhere. Things definitely are not good out there. Especially with oil up 1.38 to 132.19. Ridiculous. Over here on the island of Lana'i, gash is already $5.03 a gallon for unleaded. NICE! :(
This cost of gas has to be the reason the market is trying to fall apart. It makes complete sense as oil takes off the stock market dips. But oddly enough, unlike most oil rallies, oil stocks for the first time did not come along and in fact started showing signs of wanting to pullback. Combine that with everyone talking about $150 and $200 oil and hopefully this speculative fervor has reached its boiling point. However, as long as this ONCE great nation wakes up and starts drilling in ANWR and the OCS, I doubt we will see oil below $100 EVER!!! again.
Getting back to the market, I am sure some of this is the reason we are seeing so many distribution days in the market. Since I like to think the opposite of everyone on wall and broad it appears to me that some had hoped oil was going to top along with the ags and were ready for a tech rally. The fact that has not happened is a big reason we are all giving up. Now, I sincerely hope I am wrong about all of this. In fact, for my accounts sake, I pray I am wrong. But 6 distribution days in the IBD 100, NYSE, and the DJIA is a major warning. You do not get this many distro days WITHOUT ANY accumulation days in a healthy market. When was our last accumulation day? How about March 20th since the NYSE actually had a higher day with above average volume. Isn't that unbelievable? I have to be honest. I have been around a long time (considering that THIS IS ALL I DO besides surfing) and I can not remember the last time I have ever seen this.
In hindsight, it just seems impossible to actually think this will turn into an uptrend. If this was going to be a real rally, based on history, we would have already had 3 to 5 days of higher days with higher volume within the first FEW WEEKS! Here we are a few MONTHS into this LAME rally and we have NOTHING. This is not good folks and this is the reason my potentially bullish stance is going back to a negative nanny.
It is very hard for me to be either bullish or bearish in a market that trades on low volume and goes nowhere and therefore I will stick by that bias about not making a bullish or bearish commitment here as I will need to see volume enter this market above or below the 50 day volume average on a more consistent basis. Some have asked me about the volume above average in the Nassy. Now while I must say this was very good at first, it has now turned into distribution above the 200 DMA toward the 50 DMA this week. Therefore, you have the same situation we have when we just take a look at the index.A muddled picture.
From the March lows, both indexes are technically in uptrends. But last week everything broke those uptrends. So it is going to be real important to see how the market reacts around this are to determine if more selling or some buying is going to come in.
Considering that I am a contrarian and believe we should be buying when everyone is selling, I am not sure everyone is selling right now and therefore it seems that this is just a mixed picture. There is simply no other way to play it. I have proven in these commentaries that I know when to be bullish in bull markets and bearish in bear markets. But this market is about as mixed as it gets. As soon as a stock sells off it starts moving higher, as soon as it rallies it starts selling off. Do you know what that tells me? DO NOTHING!
It is time to once again go back to raising cash. If your stock is falling on higher volume, and you have some gains in the stock, make sure you do take some. If your stock if falling on lower volume and you have big gains already I would hold on to it and wait for a support area to take a stand. If that does not hold up, you then may want to take some off.
But I want to warn you about taking profits quickly in stocks that move up 50% in one month. Sometimes, like now, with the low volume, that will be all you will get. But if any of you will just take the freaking time to spend a few hours on ALL OF MY PAST BIG WINNERS THAT I HAVE POSTED FOR YOU you will eventually understand that to make the big money you have to hold the stocks on the way up in a bullish market. All of you LAZY people that are NOT taking the time to study ALL OF MY PAST BIG WINNERS and current longs that are doing very well, you will never learn how to find the best stocks that make the biggest money in the shortest amount of time.
I hate daytrading, I can NOT stand wasting my day watching flashing quotes all day. Maybe some of you would be 100000x better off by STOP watching the longs that I go long intraday. If you want to daytrade, go for it. Just make sure it isn't the stocks that I am going long. There is NOT ONE SINGLE stock that I enter that I plan on selling before the day is over. What am I? 12 years old. This is a game for the lame that have NO CLUE how the biggest winning stocks are created. If you want to daytrade the index futures go for it, if you want to trade stocks don't be a donkey and don't touch my positions.
The biggest problem I have with the rally is that the worst groups of the last leg down are the best groups in the current rally. Not only are the same commodity stocks and past weak stocks leading they are doing so (most of them) on lower volume than on the selloff. That is negative.
Still it is hard to judge anything without volume. Which is why when I write all of this I just wonder why am I even doing it. The low volume market is a market that most players should be out of without a doubt. But somehow us traders have some problem and think that everyday there is a money making opportunity or a reason to do something. The truth is that is pure BS. About 3 or 4 times a year you get a perfect setup and even then I am learning 1/2 fail. This low volume market is making a lot of us overanalyze the whole thing when we should just take a step back and wait for volume.
Sometimes I am not even sure what the heck I am writing about because I feel like I have talked and written about it too much. Now I know how people go crazy. So from here on out I am going to lay it out point blank how this market is and what we should do.
Back when we started selling off, I was on top of it, we went short, and scored some gains. However, not a lot of the big gains came from the best setups which caused me (but not my subscribers who beat me--WTG [I am not the jealous type-in fact i WANT you to beat me]) to underperform my normal downturn periods. This led to the January lows that with the heavy volume sent the market into neutral territory. During that time I expected another rollover but insted in March we got a tiny rally with plenty of good stocks moving. But the problem became clear quickly. The gains in the best patterns kept failing or not holding. THIS IS NOT how real bull markets start and was our first clue this was probably not going to last.
But I am a natural optomist and did believe this could turn bullish as long as the pent up money on the sidelines came back on the bull side to chase that RIDICULOUS 13.86 NYSE short-interest ratio. However, I was wrong and instead many of my best setups (which none were great but they were good) have ALL failed. So what do I do now? The same thing I always do.
Now, that I realize this stupid market is not going to cooperate as it has now destroyed every single last one of my potentially hot charts is to lock in some profits on ANY stock that took more than 5 weeks to gain 25%. If it took the stock that long get rid of half of it and put that money into a potential mover. Now if your stock is up 25% in two weeks, make sure you hold on to some but still the way this market is acting you better take 20% off. Also if any recent buys have lost the beauty of green BOP, are in a downtrend, or have broken below a recent base you need to sell some or all of it if it has completely broken the cut loss rule. If I buy a stock it is because it looks like it is going to blast off. If it don't, then it has failed miserably and needs to be dumped.
I am one of these guys that KNOW it is STUPID to buy falling stocks as I lived through 2000-2002 and was involved in LTCM when I first started so I know as soon as I lose gains or rack up losses to get out so that I have more money to put to work when times are good. Right now, times are not good but you can GUARANTEE that they will be again. There will be more max green BOP stock, they will setup and they will be buyable. Some stocks to keep an eye on for potential entries at the 50 DMA include FLS, SD, SOL, CSIQ, MR, and TMRB. That is just a VERY tiny selection of some potential fundamentally sound stocks that are setting up.
Some that you should stay away from depstie the strong fundies include CHL DRYS DSX GNK OXY DIB GHM SNHY STD which are all starting to show some very negative short term action. This can not be good for now.
But still, how bad really is it with all this low volume? It isn't. And this is my point, until really powerful BIG institutional money returns to this market it is basically a stock pickers market and since that is what I do best I will continue to try to do that. BUt I want everyone to remember, when the market is trending up 70-80% of what I go long will go up a lot and be very rewarding. However 20-30% will be crap and must be cut short. At the same time, in a sideways to bear market less than 50% of the stocks I take will work as a TON of false breakouts/bounces happen as market makers artificial create these points to trick people like us. However, if you remember to cut losses faster and take profits quicker in markets like this, you can still do very well.
For now, I advice everyone to stay low for now. Do not go long stocks unless the setup is perfect, the stock is in a group FLYING up the industry group charts, and is a top performing stock in its groups. Right now, the market is a little rocky and has taken care of our longs that were once showing us super solid gains not so nicely. So I suggest caution and once again, guess what? CASH IS KING. I suggest raising cash on anything that doesn't work and unless it is perfect leave it alone. That is all I can leave you with.
My last words is I hope you all had a better Memorial Day than me. I came down with a severe MS attack that knocked me on my ass. In over...gosh I don't know...I have never felt so tired. I could only surf (still surfed strong) for an hour but besides that slept for three days in a row including 15 hours on Saturday. I am not sure if that is normal but if anyone is a doctor and has some sugestions please send an email to the administrators at BigWaveTrading.net and they will get it to me. Thank you. ALOHA and hopefully this weekend is not as boring as last week. At least we have the basketball, hockey playoffs and MLB. Thank GOD for that!
Have a great week and great luck. Remember, be careful out there this week and DO NOT come out of the gates with a "get rich quick" mentality in this market.
Tuesday, May 27, 2008
HAPPY MEMORIAL DAY WEEKEND!!!!!!!!!!!
Happy Memorial Day Weekend. The new commentary will be fully updated by Tuesday morning. I also expect to write a few columns for Seeking Alpha, iStockAnalyst, and StraightStocks for the upcoming week. So make sure you check those sites throughout the week for updated columns.
And for everyone that reads this that is either active-duty or fought for us before, know that I APPRECIATE EVERYTHING you did to make this a great country. The war on terror will be won and it will be won via the United States Military and not by the United States Congress. What the heck is wrong with the liberals/republican-liberals in Congress? Anyways, from the bottom of my heart, THANK YOU. I KNOW places like San FranFREAKO and Berkley exist because of great men and women in our military.
LONG: THE UNITED STATES MILITARY, FREEDOM OF SPEECH AND RELIGION, AND CAPITALISM
SHORT: TAXES, LIBERALS, AND SOCIALISM
If you are a "vote for Obama" kind of whacko, don't bother posting any comments. They will NOT see the light of day!! According to my liberal friend "the new free speech is censorship of the right." Spoken like a true marxist. How do you like being censored? SUCKS, don't it? Kind of like the extreme left-biased media that isn't telling you that WE ARE WINNING AND THAT AL-QUAIDA IN IRAQ IS NEAR DEFEAT!!!!!
BAGHDAD - The U.S. ambassador to Iraq said Saturday that al-Qaida's network in the country has never been closer to defeat, and he praised Prime Minister Nouri al-Maliki for his moves to rein in Shiite and Sunni militant groups.
HAPPY MEMORIAL DAY AND HUGE!!! THANK YOU FROM ME TO THE ARMY, NAVY, AIR FORCE, MARINES, RESERVES, AND COAST GUARD!!!!!!!!!!!!!!!!!
ps: GO PENGUINS!!!!! GO LAKERS!!!! GO CELTICS!!!!! and congrats to Manchester United for being the "illest" club ever!!
And for everyone that reads this that is either active-duty or fought for us before, know that I APPRECIATE EVERYTHING you did to make this a great country. The war on terror will be won and it will be won via the United States Military and not by the United States Congress. What the heck is wrong with the liberals/republican-liberals in Congress? Anyways, from the bottom of my heart, THANK YOU. I KNOW places like San FranFREAKO and Berkley exist because of great men and women in our military.
LONG: THE UNITED STATES MILITARY, FREEDOM OF SPEECH AND RELIGION, AND CAPITALISM
SHORT: TAXES, LIBERALS, AND SOCIALISM
If you are a "vote for Obama" kind of whacko, don't bother posting any comments. They will NOT see the light of day!! According to my liberal friend "the new free speech is censorship of the right." Spoken like a true marxist. How do you like being censored? SUCKS, don't it? Kind of like the extreme left-biased media that isn't telling you that WE ARE WINNING AND THAT AL-QUAIDA IN IRAQ IS NEAR DEFEAT!!!!!
BAGHDAD - The U.S. ambassador to Iraq said Saturday that al-Qaida's network in the country has never been closer to defeat, and he praised Prime Minister Nouri al-Maliki for his moves to rein in Shiite and Sunni militant groups.
HAPPY MEMORIAL DAY AND HUGE!!! THANK YOU FROM ME TO THE ARMY, NAVY, AIR FORCE, MARINES, RESERVES, AND COAST GUARD!!!!!!!!!!!!!!!!!
ps: GO PENGUINS!!!!! GO LAKERS!!!! GO CELTICS!!!!! and congrats to Manchester United for being the "illest" club ever!!
Monday, May 19, 2008
Looking For Leading Stocks
One thing that I do not hear a lot about but that is very clear to me is that stocks that are leading ARE REALLY leading. That can be seen especially when it comes to the amount of stocks that are hitting new 52-week highs. About a couple months ago things started to slowly change when new 52-week lows stopped expanding at the pace they were.
After the March lows and a small market rally, the new high list started to slowly build. And now we are at a point where even on down days, the past two weeks, the amount of new highs either match, are breakeven, or barely losing to new lows.
On Friday there were 244 new 52-week highs to 95 new 52-week lows. This was the best reading I have seen yet, since God knows when. I know in the August to October there were a lot of stocks hitting new highs but I am not sure it looked THIS GOOD then.
The leadership is clearly focused in one area too. The energy stocks had 96 of the 224 stocks hitting new highs come from their list. These stocks that you should be watching for future bounces off the 50 DMA or breakout are PDO, FPP, ATN, PHII, RAME, HUSA, RDC, APWR, TELOZ, WLL, ESV, APC, WMB, OXY, GMXR, COP, NE, CVX, GTE, SFY, CNQ, GU, HOS, BTU, NXY, ECA, BTE, HK, CAM, HES, PDE, FTI, UNT, WFT, MCF, STR, PXD, HP, CPX, PXP, SPN, PBR, HAL, MMR, E, SSL, SWN, WTI, WHQ, PBRA, SM, EAC, GLF, PVA, FST, TTES, CXG, and WES. All of these stocks have GREAT fundamentals and are all leaders based on price performance.
Other leading groups are the Metals/Steel with 14 stocks hitting new highs. The all-stars of this group are SUTR, MTL, MEA, GTI, GGB, TS, SID, X, NUE, RS, SCHN, VMI, and MT. Behind that was the Machinery stocks with 12 new highs and WGOV, ENS, AME, BUCY, JOYG, GHM, ABB, ATU, PDE, FTI, NDSN, FLS, and CFX.
One of the hottest groups with three of the top 20 industry spots are the Transports with EGLE, UNP, GNK, BNI, KEX, NSC, WAB, and CSX. Mining had 8 hit new highs with FCX, RIO, BHP, RTP, and CLF leading the way with strong fundamentals. The Medicals are still hanging on with 7 new highs and ZOLL, ICLR, STE, and LSR are the top guys in that group.
Utility, Retail, Computer Software all rounded out the top groups with five stocks hitting new highs each. EGN, NFG, SBS, BKC, CVS, GYMB, LL, BKE, BMC, ATVI, ANSS, SY, and ANST are leading the way in those groups on Friday.
Everything you see here are hitting new highs when the market is still a good distance away from its old highs. These are our current leaders and as long as this market rallies, I want to be long these stocks.
I know some of you believe we are going to top soon. But I am telling you RIGHT NOW that stock charts look great all over the place. You name a lagging sector three months ago and it has moved up the list with a lot of high-growth technology and consumer speculative sectors. Along with the old commodity leaders just slowly selling off, which gives them a weaker RS performance to the big winners, but still keeps them rallying is taking place.
Overall, volume or no volume, as long as we trend up and I have a couple of really nice stocks and that one perfect chart--I do however need a few more perfect stock charts to have me completely fall in love, however--continues to move higher, I am going to be very happy with what I can get in a market that has a low VIX (around 17) and is full of ETF's that now suck up money that used to find its way into "hot" stocks. This is just less money that can be put to work in the momo monsters like MXC and PDO.
Aloha and I will see everyone in the chat room at 630AM HST/1230PM EST.
current longs/(shorts) and their total returns: GEOI 118% CMP 65% SOL 36% ICO 49% VISN 52% DGLY 49% HA 42% PDO 78% CPE 46% CSIQ 56% HIL 50% MTL 67% MCF 172% JST 40% IHS 258% EBIX 169% MA 477% (EEFT 33%)
After the March lows and a small market rally, the new high list started to slowly build. And now we are at a point where even on down days, the past two weeks, the amount of new highs either match, are breakeven, or barely losing to new lows.
On Friday there were 244 new 52-week highs to 95 new 52-week lows. This was the best reading I have seen yet, since God knows when. I know in the August to October there were a lot of stocks hitting new highs but I am not sure it looked THIS GOOD then.
The leadership is clearly focused in one area too. The energy stocks had 96 of the 224 stocks hitting new highs come from their list. These stocks that you should be watching for future bounces off the 50 DMA or breakout are PDO, FPP, ATN, PHII, RAME, HUSA, RDC, APWR, TELOZ, WLL, ESV, APC, WMB, OXY, GMXR, COP, NE, CVX, GTE, SFY, CNQ, GU, HOS, BTU, NXY, ECA, BTE, HK, CAM, HES, PDE, FTI, UNT, WFT, MCF, STR, PXD, HP, CPX, PXP, SPN, PBR, HAL, MMR, E, SSL, SWN, WTI, WHQ, PBRA, SM, EAC, GLF, PVA, FST, TTES, CXG, and WES. All of these stocks have GREAT fundamentals and are all leaders based on price performance.
Other leading groups are the Metals/Steel with 14 stocks hitting new highs. The all-stars of this group are SUTR, MTL, MEA, GTI, GGB, TS, SID, X, NUE, RS, SCHN, VMI, and MT. Behind that was the Machinery stocks with 12 new highs and WGOV, ENS, AME, BUCY, JOYG, GHM, ABB, ATU, PDE, FTI, NDSN, FLS, and CFX.
One of the hottest groups with three of the top 20 industry spots are the Transports with EGLE, UNP, GNK, BNI, KEX, NSC, WAB, and CSX. Mining had 8 hit new highs with FCX, RIO, BHP, RTP, and CLF leading the way with strong fundamentals. The Medicals are still hanging on with 7 new highs and ZOLL, ICLR, STE, and LSR are the top guys in that group.
Utility, Retail, Computer Software all rounded out the top groups with five stocks hitting new highs each. EGN, NFG, SBS, BKC, CVS, GYMB, LL, BKE, BMC, ATVI, ANSS, SY, and ANST are leading the way in those groups on Friday.
Everything you see here are hitting new highs when the market is still a good distance away from its old highs. These are our current leaders and as long as this market rallies, I want to be long these stocks.
I know some of you believe we are going to top soon. But I am telling you RIGHT NOW that stock charts look great all over the place. You name a lagging sector three months ago and it has moved up the list with a lot of high-growth technology and consumer speculative sectors. Along with the old commodity leaders just slowly selling off, which gives them a weaker RS performance to the big winners, but still keeps them rallying is taking place.
Overall, volume or no volume, as long as we trend up and I have a couple of really nice stocks and that one perfect chart--I do however need a few more perfect stock charts to have me completely fall in love, however--continues to move higher, I am going to be very happy with what I can get in a market that has a low VIX (around 17) and is full of ETF's that now suck up money that used to find its way into "hot" stocks. This is just less money that can be put to work in the momo monsters like MXC and PDO.
Aloha and I will see everyone in the chat room at 630AM HST/1230PM EST.
current longs/(shorts) and their total returns: GEOI 118% CMP 65% SOL 36% ICO 49% VISN 52% DGLY 49% HA 42% PDO 78% CPE 46% CSIQ 56% HIL 50% MTL 67% MCF 172% JST 40% IHS 258% EBIX 169% MA 477% (EEFT 33%)
Bullish Week Ends With Leading Stocks And The SOX Taking The Lead (Part Two)
Randomly continuing where we left off yesterday, besides the put/call showing a little of fear coming back into it even with some indexes higher. One index continues to print what should be considered bearish numbers. That is the VIX. The VIX closed at 16.47 Friday and intraday on Wednesday hit 16.10. That was the lowest reading since October right before the November top.
I know I am very bullish on this market, even without volume, due to all the setups and charts that are already breaking out out there. But don't question if I would turn, if we got like three major distribution days in-a-row. If that was the case and there was no bounce here, then you have plenty of reasons to get bearish and top calling. But as long as we have stocks like EXM DRYS, and even CNQR showing up, I think I will hold off on top calling. For all I know it will take the put/call to hit .40 and the VIX to hit sub-10 before stocks finally top off this current run.
People that have already sold all of their holdings that they started buying in March, just like the people that told me to bottom fish in March, are just not at the level they need to be at. Nobody, should be out of any DGLY, GFA, or any of the other recent longs like PWRD ISYS and OTEX which have not acting perfectly since going long (that is unless you are a newbie then you should lock in anywhere from 10% to 20% on DGLY, VISN, or anything else up 50% since we went long the past few months). However, they are not acting like GENC and it is a great thing. FEED, even before the recent selling, gave us plenty of time to take some off the table; I took 50% off before the move down. Did you?
Why did I do that? Because look at the chemical stocks. They all look like they are near a major top and the fact that they have not topped yet is SHOCKING to me as the chart patterns have set themselves up more than once in becoming perfect tops and thus good shorts later on. But when I look at MOS, POT, CF, and TNH, I know that not only have I take a 300% and 500% gain in TNH and MOS respectively but that I am in the right place by being on the sidelines as the current chart patterns are LOADED with flaws and the EASY money has CLEARLY already been made in these chemical stocks. If you are focused on them now, I ask you, where in the heck were you in 2003, 2004, 2005, 2006, or 2007?? You are a little late buying up here for a big position play. I am looking for a top.
And hopefully when that group tops, the market will shrug it off and actually take off, as a rotation from commodities to technology could almost be done and waiting for that group to top before blasting off. We will see. At the same time this rotation is occurring it is obvious that money is not coming out of the energy/oil&gas sectors of the stock market. Those two groups continue to show extremely bullish action and there is no reason to think they are done when solar stocks are only now starting to blast-off. I also do not see any oil&gas stocks making clear climax tops. That means that the run is not over and the way they are dominating the top of the IBD industry groups, only a fool would bet against these stocks here. But I take it a lot of people are or else there would not be a near-fourteen day NYSE short interest. Amazing.
If you look at the top 20 industry groups based on six-month price performance, eight of them are energy related, three are transportation related, and three are metals related. What is even more bullish for these stocks is that the transportation-shipping group has gone from #133 to #15 the past three weeks. Stocks like TBSI DSX EXM and DRYS are all setting up in BEAUTIFUL bases. I want them all, when they breakout or bounce off key support, now that the charts are right.
If I was undisciplined I would just buy them now. However, I know my game and my game makes me a lot of money. I know either buying too early or doing the worst investing mistake and chasing a breakout too far past the appropriate pivot point is not the right thing to do. So I simply do not do it. It is that simple. Don't break rules that have been PROVEN to work. How so many people can have the CANSLIM system handed to them and they simply do not take the time to learn how it works properly is STUNNING to me. It is stunning those few seconds of the month when I waste my time and watch CNBC and see so many that subscribe to IBD NEVER talk about anything the paper preaches. Especially Cramer.
How can you know that history has been mapped and chartered to show us how the best stocks work and yet you tell us to double down on NXY, IMA, or SHLD back in the day POST-top? Horrible. Patience pays off. If you daytraders would look at how much easier your life would be by making one buy and a few partial sells before a big final sell and without paying constant commissions would really improve your returns and open up your day to more free-time. There are always a few who do better being more active but I doubt those people were long my LMLP, TASR, IST, FMDAY, AFSI, or HRZ for some nice easy-to-handle big gains.
I don't like being active as I know the big money is made in the holding. If you like being active, GREAT! However, if you are active and are not happy with your results, I must recommend that you read and study my Past Big Winners. If those, and the list and list of stocks in all of the O'Neil, Weinstein, Boik, Loeb, and Livermore books, don't convince you, I have no idea how you are going to last in this game. Especially as returns vanish with a low VIX and a market FULL OF THOSE HORRIBLE ETFs which now receive money that used to go into REAL stocks. The money in ETFs could be added fuel to the fire of DGLY. But instead a QQQQ or SPY will do. Oy.
Getting back to the market's performance the past week, I have to say while I am looking for a short-term top that could lead to a shallow pullback, I am not going to convince myself that it is a given that it will happen. If this market wants to continue to run that is fine with me. The stocks I am long are going to have to show me blowoff topping signals, reversal signals, or straight up fail before I will sell a market that has this many high-quality stocks moving higher. Even with volume below average on the NYSE and only a few days of above average volume on the market. At least those days are either up or have bullish reversals.
What clearly makes me bullish here (but remember I am ALWAYS ready to sell, if I have to) is that leading stocks and the exciting tech stocks are taking a clear lead. Last week, the SOX led everything with an incredibly impressive 5.8% gain and the IBD 100 was right behind the SOX with a 4.2% gain for the week. Both indexes did much better than even the strongest mainstream index. The SP 400 gained 3.5%, the Nassy/SP 600 3.4%, and the worst of them all was the DJIA with a 1.9% gain.
This to me clearly tells me that this is a market I want to be interested in. I am interested in all markets but when I see technology stocks AND leading stocks taking the reigns as we move higher, I have to support that. Low volume or not. Do I want to see volume return soon to the upside? You better believe it. Will I be OK with a low volume rally? FOR SURE!
Right now there are too many stocks extended or they have come off the lows too fast and need to base out. Stocks like FSYS, FSIN, HMA, and MVL would all make GREAT longs in my portfolio. But there is no way I will buy these until they calm down, setup, and breakout again. Just like my CLR long. Everyone seems to want to buy it now. I am NOT touching it again until it touches that 50 DMA. Better safe, than risky and sorry.
Other stocks I would like to get long at some point with a good entry would be SNHY, BUCY, WBD, HRS, ESV, EXM, DRYS, DSX, DO, UPL, and about another 100 oil&gas stocks. Chasing just isn't my game. Patience is.
I don't have much else to say other than without options expiration volume probably would have been lower on the Nasdaq. So I guess volume was kind of lame on even Friday's move. Not that it is important or anything. I just thought I would throw that in there to illustrate that a low volume rally is what this is.
That means that sentiment dominates. Since the big boys are not putting a ton of new money to work and the volume is real low, you would think the market would be going nowhere. But the old maxim is to "never short a dull market." Yet with all this low volume that is what knuckleheads are doing. The negative news that I have discussed earlier, the negative polls with another one being released Tuesday, and the SP 500 having the worst earnings, dropping 25.9%, slump since 2001, going three q's in-a-row down are all the perfect backdrop to continue to have that NYSE short interest ratio rise and to see the put/call climb higher. Right now, the media is a growth investor's best friend. Their lies and BLATANT exaggerations make this possible.
Every message board or blog comments section I read has at least a handful of doom-and-gloomers and if you guys did not have the pleasure to listen to the comments coming from the yahoo message boards posters the day BSC collapsed then you have no clue how negative it is out there. People are simply disconnected from reality and the poor continue to get more poor due to policies they THINK is helping them but is in fact making it worse. Ignorance and being uneducated is a horrible mixture. Along with being easily manipulated. Combine those three traits and you have the politicians favorite targets.
I am going to do a post later on tonight that will focus on the strong stocks in strong sectors. I recommend, while this market is moving up, that you focus on these areas of the market in the upcoming weeks. It will be beneficial to your bank account.
Aloha from a beautiful and gorgeous Maui "where every little thing is going to be alright." I hope you all got to watch the Penguins win and watch the Celtics win. If you did not, you seriously need to get a Tivo. And if you do not like sports...you are a nerd and are probably the donkey that decides to come to Maui and "learn to surf" then you paddle out to our breaks and get in our ways and almost kill someone. What a great year for playoffs in the NHL and NBA, we have the Yankees and Mets tonight, and this year's ASP has been incredible so far. Get off your butts and get to the gym!!!!!!! :) ALOOOOOOOOHAAAAA!!!!!!
I know I am very bullish on this market, even without volume, due to all the setups and charts that are already breaking out out there. But don't question if I would turn, if we got like three major distribution days in-a-row. If that was the case and there was no bounce here, then you have plenty of reasons to get bearish and top calling. But as long as we have stocks like EXM DRYS, and even CNQR showing up, I think I will hold off on top calling. For all I know it will take the put/call to hit .40 and the VIX to hit sub-10 before stocks finally top off this current run.
People that have already sold all of their holdings that they started buying in March, just like the people that told me to bottom fish in March, are just not at the level they need to be at. Nobody, should be out of any DGLY, GFA, or any of the other recent longs like PWRD ISYS and OTEX which have not acting perfectly since going long (that is unless you are a newbie then you should lock in anywhere from 10% to 20% on DGLY, VISN, or anything else up 50% since we went long the past few months). However, they are not acting like GENC and it is a great thing. FEED, even before the recent selling, gave us plenty of time to take some off the table; I took 50% off before the move down. Did you?
Why did I do that? Because look at the chemical stocks. They all look like they are near a major top and the fact that they have not topped yet is SHOCKING to me as the chart patterns have set themselves up more than once in becoming perfect tops and thus good shorts later on. But when I look at MOS, POT, CF, and TNH, I know that not only have I take a 300% and 500% gain in TNH and MOS respectively but that I am in the right place by being on the sidelines as the current chart patterns are LOADED with flaws and the EASY money has CLEARLY already been made in these chemical stocks. If you are focused on them now, I ask you, where in the heck were you in 2003, 2004, 2005, 2006, or 2007?? You are a little late buying up here for a big position play. I am looking for a top.
And hopefully when that group tops, the market will shrug it off and actually take off, as a rotation from commodities to technology could almost be done and waiting for that group to top before blasting off. We will see. At the same time this rotation is occurring it is obvious that money is not coming out of the energy/oil&gas sectors of the stock market. Those two groups continue to show extremely bullish action and there is no reason to think they are done when solar stocks are only now starting to blast-off. I also do not see any oil&gas stocks making clear climax tops. That means that the run is not over and the way they are dominating the top of the IBD industry groups, only a fool would bet against these stocks here. But I take it a lot of people are or else there would not be a near-fourteen day NYSE short interest. Amazing.
If you look at the top 20 industry groups based on six-month price performance, eight of them are energy related, three are transportation related, and three are metals related. What is even more bullish for these stocks is that the transportation-shipping group has gone from #133 to #15 the past three weeks. Stocks like TBSI DSX EXM and DRYS are all setting up in BEAUTIFUL bases. I want them all, when they breakout or bounce off key support, now that the charts are right.
If I was undisciplined I would just buy them now. However, I know my game and my game makes me a lot of money. I know either buying too early or doing the worst investing mistake and chasing a breakout too far past the appropriate pivot point is not the right thing to do. So I simply do not do it. It is that simple. Don't break rules that have been PROVEN to work. How so many people can have the CANSLIM system handed to them and they simply do not take the time to learn how it works properly is STUNNING to me. It is stunning those few seconds of the month when I waste my time and watch CNBC and see so many that subscribe to IBD NEVER talk about anything the paper preaches. Especially Cramer.
How can you know that history has been mapped and chartered to show us how the best stocks work and yet you tell us to double down on NXY, IMA, or SHLD back in the day POST-top? Horrible. Patience pays off. If you daytraders would look at how much easier your life would be by making one buy and a few partial sells before a big final sell and without paying constant commissions would really improve your returns and open up your day to more free-time. There are always a few who do better being more active but I doubt those people were long my LMLP, TASR, IST, FMDAY, AFSI, or HRZ for some nice easy-to-handle big gains.
I don't like being active as I know the big money is made in the holding. If you like being active, GREAT! However, if you are active and are not happy with your results, I must recommend that you read and study my Past Big Winners. If those, and the list and list of stocks in all of the O'Neil, Weinstein, Boik, Loeb, and Livermore books, don't convince you, I have no idea how you are going to last in this game. Especially as returns vanish with a low VIX and a market FULL OF THOSE HORRIBLE ETFs which now receive money that used to go into REAL stocks. The money in ETFs could be added fuel to the fire of DGLY. But instead a QQQQ or SPY will do. Oy.
Getting back to the market's performance the past week, I have to say while I am looking for a short-term top that could lead to a shallow pullback, I am not going to convince myself that it is a given that it will happen. If this market wants to continue to run that is fine with me. The stocks I am long are going to have to show me blowoff topping signals, reversal signals, or straight up fail before I will sell a market that has this many high-quality stocks moving higher. Even with volume below average on the NYSE and only a few days of above average volume on the market. At least those days are either up or have bullish reversals.
What clearly makes me bullish here (but remember I am ALWAYS ready to sell, if I have to) is that leading stocks and the exciting tech stocks are taking a clear lead. Last week, the SOX led everything with an incredibly impressive 5.8% gain and the IBD 100 was right behind the SOX with a 4.2% gain for the week. Both indexes did much better than even the strongest mainstream index. The SP 400 gained 3.5%, the Nassy/SP 600 3.4%, and the worst of them all was the DJIA with a 1.9% gain.
This to me clearly tells me that this is a market I want to be interested in. I am interested in all markets but when I see technology stocks AND leading stocks taking the reigns as we move higher, I have to support that. Low volume or not. Do I want to see volume return soon to the upside? You better believe it. Will I be OK with a low volume rally? FOR SURE!
Right now there are too many stocks extended or they have come off the lows too fast and need to base out. Stocks like FSYS, FSIN, HMA, and MVL would all make GREAT longs in my portfolio. But there is no way I will buy these until they calm down, setup, and breakout again. Just like my CLR long. Everyone seems to want to buy it now. I am NOT touching it again until it touches that 50 DMA. Better safe, than risky and sorry.
Other stocks I would like to get long at some point with a good entry would be SNHY, BUCY, WBD, HRS, ESV, EXM, DRYS, DSX, DO, UPL, and about another 100 oil&gas stocks. Chasing just isn't my game. Patience is.
I don't have much else to say other than without options expiration volume probably would have been lower on the Nasdaq. So I guess volume was kind of lame on even Friday's move. Not that it is important or anything. I just thought I would throw that in there to illustrate that a low volume rally is what this is.
That means that sentiment dominates. Since the big boys are not putting a ton of new money to work and the volume is real low, you would think the market would be going nowhere. But the old maxim is to "never short a dull market." Yet with all this low volume that is what knuckleheads are doing. The negative news that I have discussed earlier, the negative polls with another one being released Tuesday, and the SP 500 having the worst earnings, dropping 25.9%, slump since 2001, going three q's in-a-row down are all the perfect backdrop to continue to have that NYSE short interest ratio rise and to see the put/call climb higher. Right now, the media is a growth investor's best friend. Their lies and BLATANT exaggerations make this possible.
Every message board or blog comments section I read has at least a handful of doom-and-gloomers and if you guys did not have the pleasure to listen to the comments coming from the yahoo message boards posters the day BSC collapsed then you have no clue how negative it is out there. People are simply disconnected from reality and the poor continue to get more poor due to policies they THINK is helping them but is in fact making it worse. Ignorance and being uneducated is a horrible mixture. Along with being easily manipulated. Combine those three traits and you have the politicians favorite targets.
I am going to do a post later on tonight that will focus on the strong stocks in strong sectors. I recommend, while this market is moving up, that you focus on these areas of the market in the upcoming weeks. It will be beneficial to your bank account.
Aloha from a beautiful and gorgeous Maui "where every little thing is going to be alright." I hope you all got to watch the Penguins win and watch the Celtics win. If you did not, you seriously need to get a Tivo. And if you do not like sports...you are a nerd and are probably the donkey that decides to come to Maui and "learn to surf" then you paddle out to our breaks and get in our ways and almost kill someone. What a great year for playoffs in the NHL and NBA, we have the Yankees and Mets tonight, and this year's ASP has been incredible so far. Get off your butts and get to the gym!!!!!!! :) ALOOOOOOOOHAAAAA!!!!!!
Sunday, May 18, 2008
Bullish Week Ends With Leading Stocks And The SOX Taking The Lead; The IBD 100 Finishes Up 4.2% And The SOX Finishes Up 5.8% This Week, Clearly Showin
There is really only one word to describe Friday's intraday action: bullish. Right off the bat, thanks to a report showing the University of Michigan consumer confidence number fell below 60 to a 28-year low, the Nasdaq fell 1.2% within the first two hours. This selling was pretty nasty but still the report should not have shocked the informed investors who saw the IBD/TIPP poll hit an all-time low last month. I am sure we can expect more of the same come Tuesday when the new data is released. Thankfully, for the bulls, cooler heads prevailed and quickly the consumer confidence news was taken as old news and shaken off.
By the end of the day, it was an impressive turnaround on all the indexes, as everything closed near their HOD. The leading index was the NYSE which scored a .5% gain. The SP 500 also was up today, gaining .1%. On the other end, the Nassy lost .2% and the DJIA lost .1% but both still closed near their HOD. Considering the losses that all the indexes had going after the first two hours there is no other way to call today anything but a victory for the bulls.
That bullish action was the second day in-a-row and the fifth day out of six that the market has started the day off weak and finished strong. I hate to think of everyone out there that is watching their stocks too closely and therefore have been shaken out of some good longs by watching the market during the day. I suggest when you are using this superior methodology that you best use it the correct way. That means not watching your stocks intraday. If you want to daytrade, fine, do whatever you got to do. But if you went long DGLY, you should still pretty much be long 75% to 100% of it for possible MONSTER stock gains. Those that have sold more than 50% of it have traded poorly and this is due to you watching the stock too closely.
The best daytraders that I have ever met only daytrade index futures. And I will tell you this. I know this methodology. I know how to make the MONSTER gains. And I know daytrading stocks will never get me what CANSLIM can. I have seen it all by now. But if you want to daytrade futures, you have my complete blessing. If I was forced to be a daytrader, I would be trading ALL of the index futures with huge margin (preferably at least 25 to 1). I know that game. But guess what? I would rather go looking for surf and then paddle out into a lineup with a lot of pretty girls and bombing sets. You can watch the market intraday, I would rather attempt to get barreled. After a good session, then I will check out the stocks. This is my lifestyle and I LOVE IT. However, if I did like sitting on my fat butt all day watching 8 to 12 monitors of flashing quotes then I would be daytrading index futures and using CANSLIM after-hours. There is not one stock I would daytrade intraday. NEVER. I know the BIG GAINS are in the HOLDING.
Speaking of big gains, since the lows on March 17 when the Nassy hit a new 18-month low the index has recovered 17% with many of my best stocks returning 30% plus gains. A lot of JERKS tried to get me to bottom fish some horrible stocks, a few days after they made 200% moves off the bottom. Those stocks all of those people told me to buy, since those initial runs, have basically returned NOTHING. But I told you then that you DID NOT have to buy the EXACT BOTTOM to make a KILLING in the stock market. And I still believe if you are 100% cash right now, if you buy the right stock you can beat ANYONE reading this who bought SPY on March 17. They bought the exact bottom and NAILED the bottom!!! WOOPPIEEE! But you didn't and instead you bought MXC and PDO two weeks ago. Now you have a 115% and 95% gain!!! Oh, but wait!!!! You did not buy the bottom. How stupid of you! Do you NOW see how foolish those people were then?? Do you see how arrogant and IGNORANT of history those FOOLS were. They blasted me for not buying the exact bottom on full margin. Since then, the returns we are seeing at BigWaveTrading is crushing the returns I am seeing in some of the "more popular" guys that I follow that were laughing at me for not going 100% long on March 17.
Those same brilliant geniuses are also now calling for a top. They believe the market has come too far too fast. Don't they understand momentum and short squeezing. We don't need volume and we don't need to rest, if the market doesn't want it. It does whatever it wants to do. And right now all you need to know is that all news is good news and that is why people keep shorting the market (NYSE short interest ratio is at another all-time high at 13.40--it takes almost 14 days to cover all shorts on NYSE based on average volume. WOW.) as they keep hearing nothing bad but news from our EXTREMELY biased news media. These blatant political lies, along with a heavy dose of global (w)fear(m)ing, keeps the public scared of the market. This is the wall of worry the market is climbing now and it is proving that it doesn't need a lot of volume.
But have you noticed that volume is starting to come in above average on the Nasdaq more consistently now. The days when it shows up the Nasdaq is either up or it has a bullish intraday reversal. That is a very key tell folks. That tells me the marketis healthier on the short-term than most give it credit. Heck even oil hitting $127 and closing at $126.02 doesn't phase this market. That is why all of our indexes carry acc/dis ratings of A and B and why we see so many technology, retail, and other growth sensitive areas of the economy starting to climb up the list of top industry groups. It is great to see so many technology, software, hardware, computer, electronics, biotech, transportation, metals, oil, and internet stocks rallying all at once. Included in that are a lot of HOT HOT stock charts. Sadly, there still is only one perfect chart out there that is working perfectly and it is up 56% from my lowest hit limit in a little under a month. That is how they should all act. There are a few cheap stocks setting up like that but nothing of CANSLIM quality has me excited of a future MONSTER stock like TASR.
Still overall it was a great week and the bears can't keep me down even though the media sure is trying. Stocks like WBD HRS ESV EXM DO DSX MTL and UPL are not listening. URBN and CSH are the exceptions and with recent longs of top quality that I have sold watch these two come back. TITN was a recent example of a top stock sold that is now back immediately. This is one strong market. Even gold looks to be bouncing again. But the stocks that are clearly dominating are the Energy stocks, especially oil&gas. However, energy stocks are coming on strong and I got my eye on CSUN and SOLF to add to my SOL, CSIQ, and FSLR collection.
The only thing I need to watch out for is getting too excited about this rally. Getting cocky about my gains is the LAST thing I want to do as I have to remember I only have one perfect chart that is out there working. Are there a few setting up that could be perfect b/o's? Absolutely. However, there have been others that have started and failed. Remember, NEU and CMP. They both produced some nice gains but the perfection ended quickly there. BRKR and ADEP are two that completely failed. Both had OBVIOUS flaws that kept them from being huge holdings. But BRKR had a great company and good growth but things don't always work out. And that is why I always cut my losses. But just like TITN, BRKR appears to be firming back up again. It isn't nearly as strong as TITN but a theme of strong stocks having trouble going down is becoming a very large and growing theme in this market. That has to be bullish, heavy volume or not.
Yes it is true low volume rallies are not healthy overall, but nobody knows how long Mr. Momentum can last. Usually when I see people calling tops long-term or short-term I get happy when I am long stocks like I am now. It is not like I am loaded up with longs but I only have 20% in cash now because SO MANY CANSLIM quality longs have been breaking out or bouncing off of great patterns. They are all working. How can I sell stocks when NONE of them are giving me topping, take profit, or cut loss signals.
On top of that the index have taken their key 200 DMA lines which is a very important technical line in the sand. A lot of funds do NOT buy the market until these key indexes are above the lines. Now that they are, it would be nice to see some big fund buying come in. But before that happens, watch for a possible pullback as the put/call buyers are starting to take an interest in the call side again. The put/call fell to its lowest levels since January on Thursday when it hit .64. But oddly enough, just a little bit of selling (or in the case of the NYSE and SP 500, a rise) is enough to raise the put/call back to .79. It isn't 1.00 but it is funny to see a bit of fear enter the market on just a morning two-hour dip that has an EOD close near the HOD.
...........it is getting late on Maui as I had a nice (but small :() surf session that lasted 1 1/2 hours. But it was enough to tucker me out early. When I wake up I will have part two finished by the time the NHL game is over. Go Penguins. You gotta have Sidney Crosbey in the finals!!!.........
By the end of the day, it was an impressive turnaround on all the indexes, as everything closed near their HOD. The leading index was the NYSE which scored a .5% gain. The SP 500 also was up today, gaining .1%. On the other end, the Nassy lost .2% and the DJIA lost .1% but both still closed near their HOD. Considering the losses that all the indexes had going after the first two hours there is no other way to call today anything but a victory for the bulls.
That bullish action was the second day in-a-row and the fifth day out of six that the market has started the day off weak and finished strong. I hate to think of everyone out there that is watching their stocks too closely and therefore have been shaken out of some good longs by watching the market during the day. I suggest when you are using this superior methodology that you best use it the correct way. That means not watching your stocks intraday. If you want to daytrade, fine, do whatever you got to do. But if you went long DGLY, you should still pretty much be long 75% to 100% of it for possible MONSTER stock gains. Those that have sold more than 50% of it have traded poorly and this is due to you watching the stock too closely.
The best daytraders that I have ever met only daytrade index futures. And I will tell you this. I know this methodology. I know how to make the MONSTER gains. And I know daytrading stocks will never get me what CANSLIM can. I have seen it all by now. But if you want to daytrade futures, you have my complete blessing. If I was forced to be a daytrader, I would be trading ALL of the index futures with huge margin (preferably at least 25 to 1). I know that game. But guess what? I would rather go looking for surf and then paddle out into a lineup with a lot of pretty girls and bombing sets. You can watch the market intraday, I would rather attempt to get barreled. After a good session, then I will check out the stocks. This is my lifestyle and I LOVE IT. However, if I did like sitting on my fat butt all day watching 8 to 12 monitors of flashing quotes then I would be daytrading index futures and using CANSLIM after-hours. There is not one stock I would daytrade intraday. NEVER. I know the BIG GAINS are in the HOLDING.
Speaking of big gains, since the lows on March 17 when the Nassy hit a new 18-month low the index has recovered 17% with many of my best stocks returning 30% plus gains. A lot of JERKS tried to get me to bottom fish some horrible stocks, a few days after they made 200% moves off the bottom. Those stocks all of those people told me to buy, since those initial runs, have basically returned NOTHING. But I told you then that you DID NOT have to buy the EXACT BOTTOM to make a KILLING in the stock market. And I still believe if you are 100% cash right now, if you buy the right stock you can beat ANYONE reading this who bought SPY on March 17. They bought the exact bottom and NAILED the bottom!!! WOOPPIEEE! But you didn't and instead you bought MXC and PDO two weeks ago. Now you have a 115% and 95% gain!!! Oh, but wait!!!! You did not buy the bottom. How stupid of you! Do you NOW see how foolish those people were then?? Do you see how arrogant and IGNORANT of history those FOOLS were. They blasted me for not buying the exact bottom on full margin. Since then, the returns we are seeing at BigWaveTrading is crushing the returns I am seeing in some of the "more popular" guys that I follow that were laughing at me for not going 100% long on March 17.
Those same brilliant geniuses are also now calling for a top. They believe the market has come too far too fast. Don't they understand momentum and short squeezing. We don't need volume and we don't need to rest, if the market doesn't want it. It does whatever it wants to do. And right now all you need to know is that all news is good news and that is why people keep shorting the market (NYSE short interest ratio is at another all-time high at 13.40--it takes almost 14 days to cover all shorts on NYSE based on average volume. WOW.) as they keep hearing nothing bad but news from our EXTREMELY biased news media. These blatant political lies, along with a heavy dose of global (w)fear(m)ing, keeps the public scared of the market. This is the wall of worry the market is climbing now and it is proving that it doesn't need a lot of volume.
But have you noticed that volume is starting to come in above average on the Nasdaq more consistently now. The days when it shows up the Nasdaq is either up or it has a bullish intraday reversal. That is a very key tell folks. That tells me the marketis healthier on the short-term than most give it credit. Heck even oil hitting $127 and closing at $126.02 doesn't phase this market. That is why all of our indexes carry acc/dis ratings of A and B and why we see so many technology, retail, and other growth sensitive areas of the economy starting to climb up the list of top industry groups. It is great to see so many technology, software, hardware, computer, electronics, biotech, transportation, metals, oil, and internet stocks rallying all at once. Included in that are a lot of HOT HOT stock charts. Sadly, there still is only one perfect chart out there that is working perfectly and it is up 56% from my lowest hit limit in a little under a month. That is how they should all act. There are a few cheap stocks setting up like that but nothing of CANSLIM quality has me excited of a future MONSTER stock like TASR.
Still overall it was a great week and the bears can't keep me down even though the media sure is trying. Stocks like WBD HRS ESV EXM DO DSX MTL and UPL are not listening. URBN and CSH are the exceptions and with recent longs of top quality that I have sold watch these two come back. TITN was a recent example of a top stock sold that is now back immediately. This is one strong market. Even gold looks to be bouncing again. But the stocks that are clearly dominating are the Energy stocks, especially oil&gas. However, energy stocks are coming on strong and I got my eye on CSUN and SOLF to add to my SOL, CSIQ, and FSLR collection.
The only thing I need to watch out for is getting too excited about this rally. Getting cocky about my gains is the LAST thing I want to do as I have to remember I only have one perfect chart that is out there working. Are there a few setting up that could be perfect b/o's? Absolutely. However, there have been others that have started and failed. Remember, NEU and CMP. They both produced some nice gains but the perfection ended quickly there. BRKR and ADEP are two that completely failed. Both had OBVIOUS flaws that kept them from being huge holdings. But BRKR had a great company and good growth but things don't always work out. And that is why I always cut my losses. But just like TITN, BRKR appears to be firming back up again. It isn't nearly as strong as TITN but a theme of strong stocks having trouble going down is becoming a very large and growing theme in this market. That has to be bullish, heavy volume or not.
Yes it is true low volume rallies are not healthy overall, but nobody knows how long Mr. Momentum can last. Usually when I see people calling tops long-term or short-term I get happy when I am long stocks like I am now. It is not like I am loaded up with longs but I only have 20% in cash now because SO MANY CANSLIM quality longs have been breaking out or bouncing off of great patterns. They are all working. How can I sell stocks when NONE of them are giving me topping, take profit, or cut loss signals.
On top of that the index have taken their key 200 DMA lines which is a very important technical line in the sand. A lot of funds do NOT buy the market until these key indexes are above the lines. Now that they are, it would be nice to see some big fund buying come in. But before that happens, watch for a possible pullback as the put/call buyers are starting to take an interest in the call side again. The put/call fell to its lowest levels since January on Thursday when it hit .64. But oddly enough, just a little bit of selling (or in the case of the NYSE and SP 500, a rise) is enough to raise the put/call back to .79. It isn't 1.00 but it is funny to see a bit of fear enter the market on just a morning two-hour dip that has an EOD close near the HOD.
...........it is getting late on Maui as I had a nice (but small :() surf session that lasted 1 1/2 hours. But it was enough to tucker me out early. When I wake up I will have part two finished by the time the NHL game is over. Go Penguins. You gotta have Sidney Crosbey in the finals!!!.........
Wednesday, May 14, 2008
Another Bullish Day Equals Another Great Day For Our Longs
Today was yet another day where the market did not do much but our longs crushed it. This time it was our recent solar stock purchases. This continues a very bullish pattern of where everything I buy continues to move higher. Once again, tonight there are four new longs and zero full sells. This has been a recurring theme and is a theme of any bullish market. Higher volume or not.
Even though we still have zero institutional support on the indexes, it is clear that in this stock picking market there are a lot of stocks they are accumulating. The majority are in the energy industries, obviously. It might not be easy to buy stocks correct but it sure has not been difficult knowing where to put a lot of money. The gains in two solar stocks today that I am heavily long is more proof that as long as you know how to pick the best stocks, you can destroy the stock market. Remember, all those people from weakmoney.com that were telling me to go long stocks like GS, LEH, MS. I don't know about you but I told you then that you did NOT have to buy the exact low to make a CRAPLOAD of money in the stock market. My recent longs are proving that.
For those that still think that you have to buy the exact low, this should now prove to you that those talking heads on CNBC are just that. Talking heads.
The market was even better by my book as leading, small, and tech stocks all did well today. Not only that but I have bases setting up EVERYWHERE in technology and leading stocks. Take that situation with all these solar and oil stocks running and you have a market that has somewhere to rotate when the oil stocks do climax and top. If that happens, these tech stocks are setting up to be PERFECT candidates for money to move into you. One thing is definitely for sure, I see a LOT of stocks that were in nasty downtrends trying to bottom on a TON of volume with green BOP on a lot of these charts. Take that with all our leading stocks and stocks that we are long that are KILLING IT (remember, if this bull last a few months, THIS IS JUST THE START!!!! all you DGLY sellers) and you have a very fun low volume market rally. I don't like it and don't think it will hold, unless we get more volume. But, heck, I will take ANYTHING I can get.
The lack of perfect charts and volume however will be what keeps me from getting bullish on the market. Just looking at stocks like AAPL or BIDU shows that the selloff on huge distribution has been followed by absolutely ZERO accumulation, just like the indexes. The big stocks are moving higher on no volume, the market is moving higher on no volume, but the true leaders (the 15 that I am VERY LONG and the 60 longs that are flying high but are small positions) are moving higher on huge volume. These 75 stocks that we have in our portfolios all look wonderful. A few might be close to cut losses but nothing is really hurting when it fails. ADEP and BRKR are the only two that hurt a little and stocks like GFA OTEX DGLY SOL and CSIQ more than make up for that.
The key here is to just go with the trend, until it ends. I see so many anticipating a top. I suggest you do do that. But also, prepare for a possibility that a low volume rally continues and when volume does return it could possibly be mutual, hedge, and pension funds JUMPING back in the market so they do not lose performance. This big money chasing gains so they can try to show outperformance to the general market, along with the NYSE short interest at 13 days to cover, could lead to some HUGE!!!! gains unlike anything I have seen since 2003. With that bullish possibility made possible THANKS TO THE GLOBAL economy, it is hard to be too bearish here. Also watching your new longs where you got GREAT fills rocket 20% to 25% doesn't hurt either. I am still riding the trend higher but I am losing some bullish luster. However, I do not know what the future holds and can only listen to my charts. My charts say we are going higher. But without volume I am not sure how that is going to happen.
Not only do we not have volume but NOW the crowd is starting to get quite bullish. Oh, how quickly we can turn on a dime in this great country. One day we are extremely bearish, the next day everything thinks EVERYTHING is going to be PERFECT once a radical left gets into the office. The truth is it is better to be neutral and go with the trend. The short-term trends are up, the longer-term are down. That is it. That is all you got to know to make HUGE money. The reasons why or how is NEVER IMPORTANT. It is a freaking waste of good ocean or surf time. The ocean and surfing is priority 2-9 on my list of things. Stocks is #10 with my gf and remaining family at #1. Never forget that. I think I will be 50 years old before I fully embrace this lifestyle. I just don't want to look like Cramer, Rev, or Kass by the time I hit that age.
For all the wasted time researching the reasons why something happened, your time would be better off spent updating your CANSLIM watchlist and other leading stock scans. Besides that, studying EVERY SINGLE ONE OF MY PAST BIG WINNERS IS A MUST!! You MUST study every one!!!! You need to see that the exact same patterns show up over-and-over-and-over. There might be 20 one year and only 2 the next but there will always be one. We had 3-4 last year and already have had 4 start and only 1 stick. You all know what that one is. If you don't, you really should try stepping up and trying at least a month of my silver service. I guarantee you SOMETHING will make you a LOT of money and NOTHING will EVER break your bank.
My biggest problem with going long heavily on this day and any day forward, if we keep rising without a pullback, is that the sentiment gauges are starting to show complacency. I warned you that if I saw the put/call fall below .70 that I would get a bit nervous about buying stocks and being bullish. That happened today as it came in at .69. The next sentiment indicator is the VIX. This stupid index has fallen to a 2008 low yesterday, which means that the crowd is more complacent now (err...bullish) than at any point in 2008. There are a lot of believers now and that is reflected in the VIX being around the 17 area. These are two clear indexes that indicate to me the crowd is starting to embrace this rally. So, for now, I will enjoy it too, but I wouldn't be surprised if we saw a pullback sometime soon.
The key with this is how volume will be on the pullback. Will it still be low? If it is that will be bullish as smart money investors will probably then realize the lows might have been seen and that could spur a ton of sidelined money into the market. Or if we pullback on heavy volume, we could breakdown and set new lows. EITHER WAY, I AM READY!! Bring it on Mr. Market. Nothing it can throw my way will ever surprise me.
I am about ready to passout as I am still very tired after my HORRIBLE endoscopy procedure (I woke up in the middle of it and it was horrible!!!!!!!!!!!!!!!!). I don't know if it is normal to wake up in the middle of these things but if I knew that was going to happen, there is NO WAY IN HELL I WOULD HAVE DONE THAT. The pain, closterphobia, and gagging was SO HORRIBLE that it took 5 nurses to hold me down so I would not pull the tube out. It was a HELLISH moment of my life and when I woke up a second time I was crying. VERY ODD and scary. I am not sure if that is normal or what the hell happened but at least we do have good news. Nothing showed up. They did take some biopsies. So we will see what that shows. But I still wonder if that was normal??? Oh well. Who cares, it is over, THANK GOD!
Aloha and I will see you in the chat room, where I am NEVER under sedation and always alive and kicking. Not even 10 police officers could keep me down. Now a taser......sure. I have seen enough episodes of cops. LOL, I know that NO ONE escapes the taser. LOLOLOLOL. ALOOOOOHA!!!
Even though we still have zero institutional support on the indexes, it is clear that in this stock picking market there are a lot of stocks they are accumulating. The majority are in the energy industries, obviously. It might not be easy to buy stocks correct but it sure has not been difficult knowing where to put a lot of money. The gains in two solar stocks today that I am heavily long is more proof that as long as you know how to pick the best stocks, you can destroy the stock market. Remember, all those people from weakmoney.com that were telling me to go long stocks like GS, LEH, MS. I don't know about you but I told you then that you did NOT have to buy the exact low to make a CRAPLOAD of money in the stock market. My recent longs are proving that.
For those that still think that you have to buy the exact low, this should now prove to you that those talking heads on CNBC are just that. Talking heads.
The market was even better by my book as leading, small, and tech stocks all did well today. Not only that but I have bases setting up EVERYWHERE in technology and leading stocks. Take that situation with all these solar and oil stocks running and you have a market that has somewhere to rotate when the oil stocks do climax and top. If that happens, these tech stocks are setting up to be PERFECT candidates for money to move into you. One thing is definitely for sure, I see a LOT of stocks that were in nasty downtrends trying to bottom on a TON of volume with green BOP on a lot of these charts. Take that with all our leading stocks and stocks that we are long that are KILLING IT (remember, if this bull last a few months, THIS IS JUST THE START!!!! all you DGLY sellers) and you have a very fun low volume market rally. I don't like it and don't think it will hold, unless we get more volume. But, heck, I will take ANYTHING I can get.
The lack of perfect charts and volume however will be what keeps me from getting bullish on the market. Just looking at stocks like AAPL or BIDU shows that the selloff on huge distribution has been followed by absolutely ZERO accumulation, just like the indexes. The big stocks are moving higher on no volume, the market is moving higher on no volume, but the true leaders (the 15 that I am VERY LONG and the 60 longs that are flying high but are small positions) are moving higher on huge volume. These 75 stocks that we have in our portfolios all look wonderful. A few might be close to cut losses but nothing is really hurting when it fails. ADEP and BRKR are the only two that hurt a little and stocks like GFA OTEX DGLY SOL and CSIQ more than make up for that.
The key here is to just go with the trend, until it ends. I see so many anticipating a top. I suggest you do do that. But also, prepare for a possibility that a low volume rally continues and when volume does return it could possibly be mutual, hedge, and pension funds JUMPING back in the market so they do not lose performance. This big money chasing gains so they can try to show outperformance to the general market, along with the NYSE short interest at 13 days to cover, could lead to some HUGE!!!! gains unlike anything I have seen since 2003. With that bullish possibility made possible THANKS TO THE GLOBAL economy, it is hard to be too bearish here. Also watching your new longs where you got GREAT fills rocket 20% to 25% doesn't hurt either. I am still riding the trend higher but I am losing some bullish luster. However, I do not know what the future holds and can only listen to my charts. My charts say we are going higher. But without volume I am not sure how that is going to happen.
Not only do we not have volume but NOW the crowd is starting to get quite bullish. Oh, how quickly we can turn on a dime in this great country. One day we are extremely bearish, the next day everything thinks EVERYTHING is going to be PERFECT once a radical left gets into the office. The truth is it is better to be neutral and go with the trend. The short-term trends are up, the longer-term are down. That is it. That is all you got to know to make HUGE money. The reasons why or how is NEVER IMPORTANT. It is a freaking waste of good ocean or surf time. The ocean and surfing is priority 2-9 on my list of things. Stocks is #10 with my gf and remaining family at #1. Never forget that. I think I will be 50 years old before I fully embrace this lifestyle. I just don't want to look like Cramer, Rev, or Kass by the time I hit that age.
For all the wasted time researching the reasons why something happened, your time would be better off spent updating your CANSLIM watchlist and other leading stock scans. Besides that, studying EVERY SINGLE ONE OF MY PAST BIG WINNERS IS A MUST!! You MUST study every one!!!! You need to see that the exact same patterns show up over-and-over-and-over. There might be 20 one year and only 2 the next but there will always be one. We had 3-4 last year and already have had 4 start and only 1 stick. You all know what that one is. If you don't, you really should try stepping up and trying at least a month of my silver service. I guarantee you SOMETHING will make you a LOT of money and NOTHING will EVER break your bank.
My biggest problem with going long heavily on this day and any day forward, if we keep rising without a pullback, is that the sentiment gauges are starting to show complacency. I warned you that if I saw the put/call fall below .70 that I would get a bit nervous about buying stocks and being bullish. That happened today as it came in at .69. The next sentiment indicator is the VIX. This stupid index has fallen to a 2008 low yesterday, which means that the crowd is more complacent now (err...bullish) than at any point in 2008. There are a lot of believers now and that is reflected in the VIX being around the 17 area. These are two clear indexes that indicate to me the crowd is starting to embrace this rally. So, for now, I will enjoy it too, but I wouldn't be surprised if we saw a pullback sometime soon.
The key with this is how volume will be on the pullback. Will it still be low? If it is that will be bullish as smart money investors will probably then realize the lows might have been seen and that could spur a ton of sidelined money into the market. Or if we pullback on heavy volume, we could breakdown and set new lows. EITHER WAY, I AM READY!! Bring it on Mr. Market. Nothing it can throw my way will ever surprise me.
I am about ready to passout as I am still very tired after my HORRIBLE endoscopy procedure (I woke up in the middle of it and it was horrible!!!!!!!!!!!!!!!!). I don't know if it is normal to wake up in the middle of these things but if I knew that was going to happen, there is NO WAY IN HELL I WOULD HAVE DONE THAT. The pain, closterphobia, and gagging was SO HORRIBLE that it took 5 nurses to hold me down so I would not pull the tube out. It was a HELLISH moment of my life and when I woke up a second time I was crying. VERY ODD and scary. I am not sure if that is normal or what the hell happened but at least we do have good news. Nothing showed up. They did take some biopsies. So we will see what that shows. But I still wonder if that was normal??? Oh well. Who cares, it is over, THANK GOD!
Aloha and I will see you in the chat room, where I am NEVER under sedation and always alive and kicking. Not even 10 police officers could keep me down. Now a taser......sure. I have seen enough episodes of cops. LOL, I know that NO ONE escapes the taser. LOLOLOLOL. ALOOOOOHA!!!
Sunday, May 04, 2008
Bullish Week Ends With Mixed Trading On The Major Market Indexes; Individual Stocks Are Starting To Look Real Good
It was another overall boring session to end the week but despite the overall boring tone to Friday's session it was still a bullish session underneath as many stocks had solid sessions and many stocks that I was long had a very positive session. Overall, profit taking was quite mild in the AM and the strong mid-day rally into the close shows the bears are still not in control.
This kind of action on a do nothing day is just what I like to see in a market that refuses to do much. If there would have been a lot of blowups and negative action today, then I would have been a lot less enthusiastic about the non-event that Friday was.
By the close, the NYSE was up .6%, the SP 500 was up .3%, and the DJIA was flat. The Nasdaq finished lower but the intraday support and positive action by the close is something that has to be considered positive overall. I mean obviously if this market was real weak they would have sold them into the close.
One of the bright spots on Friday's trading came via the IBD indexes. The IBD 85-85 index added 1.1% on Friday which was much better than the NYSE's .60% gain which shows that leading stocks are still slowly making a rotation into stronger leaders.
The odd thing though is it does not show up in the accumulation/distribution ratings of the indexes in Investors Business Daily. The Nasdaq is the best index with an A rating for acc/dis, the SP 500 has a B+, the NYSE sports a strong B rating for acc/dis, and the IBD 85-85 has that C+ rating that I have already mentioned.
This C+ rating is probably going to go away soon as the rotation from past leading ag, oil, steel, and metal stocks moves into retail, technology, and financial stocks. When this rotation is over and the new leaders are ready to run the acc/dis rating will rise and that will confirm that it is a powerful new bull market.
Remember, we are rallying on lower volume on both indexes. It is only recently that the Nasdaq has seen volume start to come in above average on that index. For the NYSE, however, I believe it is now 30 days (a full month) in a row that the NYSE has closed on below average volume.
Now, while there is nothing wrong with making a good amount of money in a low volume general market rally, as long as the stocks we are going long are moving up on higher volume, we still have to be careful about marrying the market's bias here until we start to see some heavy volume return.
It is very obvious that the crowd has turned bullish recently, via the 55% bullish reading on the AAII survey, but that amount of bullishness has not translated into the crowd acting upon that. In the other survey, which I find MUCH MORE IMPORTANT, bulls are beating bears 40.9% to 31.8% but the bears were beating bulls for almost a full month. That was the first time since late 2005 that bears crossed bulls and was the first time that I can remember since 2002/2003 where the bears beat the bulls for more than a week. So the crowd is turning a little bullish by what they say but how are they acting?
Mutual funds are still hoarding cash as the levels rise in a lot of funds (like I have said before, I have not seen this much cash since 2001-2002 in leading growth funds). Along with mutual funds still yet to get back to work, we have the retail crowd still buying puts and shorting stocks. That can be seen by watching our put/call ratio. This ratio barely EVER goes under .80 anymore. This is a byproduct of the dumb money constantly seeing every rally as a chance to short. That can be seen in the most recent data as the put/call ratio jumped from .81 to .88 after a huge Thursday rally in the Nassy. It fell slightly this weekend to .84 but it is still above that .80 level. While a reading of 1 or higher is a reading of a crowd that is bearish, being at .80 is no bullish matter either. A reading around .80 to 1.6 can be considered bullish for stocks as a contrarian.
On top of this investment vehicle showing that the crowd still has a slight "let's short this market" bias is the recently important NYSE short-interest ratio. This key indicator of how the dumb money is investing is showing that the crowd continue to believe shorting this market is the right play as we must be in a recession. Considering a recession is back to back quarters of negative GDP growth, it is clearly obvious to me that a reading of positive .6% is not a negative number. So for all of those for sure we are in a recession I have a bit of a newsflash. You are going to be waiting a long time. There is not a recession out there. There is simply a slowdown. Yet here people are shorting stocks like it is the right play. This has caused the ratio to hit YET ANOTHER ALL-TIME high after Friday's session of 12.58. It now takes almost a full 13 days of average NYSE volume to clean out the shorts.
This might be why we are seeing the market rally for such a long time on low volume. As long as the dumb money is out there buying puts (that they have no business buying), selling stocks shorts, or selling stocks rising higher, then you can be sure this low volume rally, along with the way momentum works, will lead us to a market that should continue to see solid gains. A market, who's rally is not believed, can be a market that rises on low volume for a very long time. As long as the crowd wants to short stocks into a rising market, you can be sure there will be shorts from lower levels that will be squeezed and forced to cover their shorts as they sell them at higher and higher prices. As these past shorts are then forced to cover stock that can't be found the stock will be forced to rise until more sellers come out to sell the stock. If those sellers are short-sellers, then later on they will be squeezed and this game can continue on and on, until volume to the downside finally returns. But most of the time the heavy volume selling does not follow a low volume rally that has lasted this long.
Normally, a low volume rally that has lasted at least a month, historically, turns into a rally that rises on heavy volume. But once most players realize their shorting of a low volume rally has turned into a runaway bull market and they now see that THEY MUST BUY and get long, that is usually when the rally is dead and the heavy volume selling returns. Right now, in this market, the way charts are setting up in sound bases all over the place, it appears that a further continuation of this rally would be what the good doctor ordered.
There are multiple other signs that indicate that the worst may be behind us in the market via the way the sector leadership and rotation seems to be playing out. The CRB index, to me, appears to be making a very short term almost tweezer like double top. The first week's selloff was a nasty 10% hit and this weeks hit was almost 5% until Friday's rise. That, after the slow rise, seemed to be very bearish. Watching an index slowly take its time hitting new highs and then seeing it reverse HARD right afterwards always makes me nervous as historically it has signaled tops.
On my weekly CRB index chart, I have negative divergence in the TSV, moneystream, and RS line, as they are all making lower highs, while price makes higher highs. The new high was barely a new high but considering all these indicators could not keep up with price is a huge hint that momentum is waining. The strength in these stocks was obviously the reason why the best stocks of the rally were ag, oil, steel, cyclicals, and gold stocks. However, with the selloff in these stocks , along with the CRB looking like it is, it is possible there could be a rotation of these stocks into the stocks that are showing VERY bullish chart action by either setting up bases, putting in what does look like REAL HEAVY volume bottoms, or breaking out of well formed patterns. Those charts are all over the place but are MOST obvious to me in the financials, retail, and technology stocks.
These stocks are setting up everywhere with green to max green BOP charts. Even though I still do not have anything perfect out there setting up in a perfect base with a perfect price, volume, and BOP setup, I still see stocks all over the place that are in early stages of a base building period or are racing up the right side of the charts that with one more base building area would in fact possibly be great charts. I have my eye on quite a few but every day more and more pop up which is a clearly healthy development for this market. This action was NOT seen during any other period since the November top where the big-cap tech stocks all started their journey lower.
I guess you can say oil, gas, and steel stocks are still the leaders. But in the past week we have seen six new industry groups enter the top 20 of all industry groups in IBD. I focus on this list the most when I am looking for future potential longs in bull markets as 37% of a stocks move is completely correlated to its industry group. You may find one or two gems in a weak industry group but normally, unless the stock is extremely powerful and strong, you are simply not going to find stocks that can move with such certainty and ease as a leading issue. The groups that are starting to climb higher that are not in the top 20 yet are also key areas of interest and I see a lot of technology related groups climbing which makes me excited.
However, remember, just because a group makes the list does not mean it is for certain to be a leader. Good thing for us, because if you remember, at the start of the year, medical stocks made up 10 of top 20 industry groups. How many are there now? One. Medical-Hospitals. And while there is not a lot of high tech in this group YET the new groups in this list still are loaded with leaders. Especially the transportation groups which make up three of top 12 industry groups after Friday's close. This should be no surprise for those of us that follow the leaders. These stocks have been showing up in my dynamic price/volume scans for about three months now, which proves they were starting to show leadership even before the whole group was. Leaders like CHRW, AAWW, and GWR clearly stand out in my scans. Also the DJ Transportation average is the leading index since January 1, 2008 is up 16% which is only one of two industry indexes higher since 1/1/2008. The other is the Consumer Index which is up 1.7%. Clearly it is all about Transportation stocks.
That is why 45% of the Transportation-Railroad stocks hit brand new 52-week highs on Friday. The Transportation-Trucking index has risen from #183 six months ago to #12 which can only be outdone by the Building-Res/Comm group which has moved from the worst spot at #197 five months ago to #5.
Sticking with the theme of strength, some of the other great industry groups on Friday came from groups already near the top. The top Oil&Gas-US Expl/Prod remains on top and gained 1.8% but within the top 20 Steel-Producers rose 2.4%, Energy-Other rose 2.8%, Chemical-Fertilizers rose 2.2%, Machinery-Construction/Man. rose 2.4%, the Metal Ore group rose 3.1%, and the Oil&Gas-Drilling stocks powered ahead an impressive 3.8% gain. This was a good showing amongst top stocks even though SOME of these groups (like chem-fert) appear to be topping and rotating into new tech related stocks. On the other end of the spectrum more good news can be said about the bottom 20 groups as six of the 10 worst groups on Friday were in the bottom 20. This is a good market that is rewarding leaders and punishing laggards. This is how it is supposed to be. It has been about a LONG TIME since the market has acted appropriately.
Even though we did make good money in 2006 and 2007, the low VIX along with the lame action of the overall market made it very hard to rack up huge gains. The constant choppiness of the overall uptrend and lack of any big moves made it tough. There is and was no doubt about that. Before this month, the past six months were the hardest period for yours truly to make big money. I simply had never gone through such an odd period where EVERY LARGE purchase/short made by me either failed or barely worked and EVERY!!!! marginal long/short would end up being GREAT trades. That helped lead me to a 2% gain to an 8% loss (which STILL kept me within the top 5% of all mutual funds which is ALWAYS my goal in bear markets; in bull markets I want to be within the top 2% of all funds!!!!!!!!!!!!!!!!!!!!!!!!!!!!!--I have been around too long now to want to just be in the top 5%) on 5 different accounts that I run during that time. The overall return was a gain of 2%. But April came in and went out with a bang And so far May is starting itself out on the right foot as Thursday and Friday were very good to my portfolio.
The biggest problem I had with my portfolio from November to January was the fact EVERY short I loaded up on did not do that well while EVERY short I took small positions on DID WONDERFUL! That along with longs that did show not doing well, made it a rough period. Remember, in January 10 NEW industry groups entered the top 20 groups. THEY WERE ALL MEDICAL. To me that means that medical stocks are about to become your NEXT BIG WINNERS during the market downtrend. Since medical stocks lead in bear markets, I naturally assumed the way things were going that the downtrend would stay.
But come 1/22 and 1/23 the downtrend ran into Fed liquidity pressure and the selling was done. Not only that but the defensive stocks then reversed and the leading medical stocks started breaking down. However, while waiting for more shorts to setup, it became clear cash was king and cash remained king for a few months. So the right play turned out to be cash. Thankfully I did that, instead of forcing shorts, as that allowed me to take that cash and IMMEDIATELY convert it into new long positions once hot charts like HA started showing up. Obviously, staying nimble in this market is a must.
For now the leaders look great and on Friday for the first time during any market session where the action was mixed, new highs still comfortably beat new lows. There were 137 new 52-week highs to 83 new 52-week lows. This clearly tells me that the overall action UNDERNEATH the market has FINALLY turned bullish. Like I just said, this is the first mixed session, that STARTED weak, and ended up with a mixed close that saw new highs kill new lows. This is a very good thing and continues a SLOW rotation from a weak market to a strong market.
Some of our new leadership is now becoming more clear and if some of you do not know where that is I am going to list some groups that could continue to outshine in this market and some stocks that could be monster stocks with more accumulation and mutual fund support. The new batch of leaders are coming out of the Banks (18 new highs on Friday)-ITU, BBD, UBB, CIB, BAP, UMBF, and RBCAA. The Medical group (14)-LSR, ICLR, AMED, BABY, PRGO, and GILD. The Energy group (14)-SPN SM PQ. The Transportation group-TGH, BNI, GWR, CHRW, AAWW, CSX, and KSU. The Electronics (7)-TTMI, DRS, CLS, GLW, APH, and AXYS. Utility (6)-NFG, CPL, and LG. Business Services (6)-WW, UNF, WWIN, and VISN. Savings&loans (5)-LABC, OCFC, and HCBK. Machinery (5)-GHM, JST, BMI, and CIR. Food/Beverage (5)-SDA, FLO, and OME. Retail (5)-CBD ARO. Internet-SOHU, NTES, and ELNK.
If this trend of stocks continue to show up in our new high list, I am sure it will not be too much longer until EVER day higher on the Nasdaq and NYSE is on above average daily volume. The YHOO and MSFT deal has fallen apart and if that ends up helping MSFT which makes up almost 7% of the Nasdaq, I have a feeling tomorrow could be a great confirmation day follow-through for the current rally. However, if it just ends up being a low volume rally on Monday, and I still get plenty of GENC and HA type of action, I will be more than happy to take that. We will see where tomorrow brings us but so far it is a possible trip to "MONSTER STOCK RETURN" land. I hope that is the case! I have been waiting a VERY LONG TIME for a chance to make some VERY BIG MONEY. Since the November top, it has been like pulling teeth. Hopefully, we are through with that low follow-through stage.
Aloha and I will see you in the chat room where stock picks turn into stock winners as long as you buy the best, cut your losses on your worst, and learn when to sell near the top when you get it really right. We have a lot of chat room member but a LOT OF YOU OLD TIMERS WITH EXPERIENCE WHO ARE STILL WITH US HAVE NOT BEEN SHOWING UP NEARLY AS MUCH AS YOU USED TO. IF THIS MARKET IS TURNING, I SURE WOULD APPRECIATE IT IF YOU GOT YOUR MONEYS WORTH AND MADE AN APPEARANCE IN THE CHAT ROOM SOMETIME BEFORE THE CLOSING BELL. There are a LOT of new guys that need more wisdom, guidance, and experience from regular members. So hopefully more than 20 of you can show up at once. The herd has been small and I hope the experienced guys that are showing up less and less (YOU KNOW WHO YOU ARE AND YES! I AM TALKING ABOUT YOU) are still watching the market as close as they were when the time wasn't right. Now that the time is right to make money, I recommend you get yourself into the game before I start hearing statements like "dang, I missed that one. I should have been paying closer attention but I thought it was OK to go away." Missing the next HRZ (the most recent 'Past Big Winner' posted) is inexcusable.
Great luck and stay disciplined! ALOOOOOOHA!!
This kind of action on a do nothing day is just what I like to see in a market that refuses to do much. If there would have been a lot of blowups and negative action today, then I would have been a lot less enthusiastic about the non-event that Friday was.
By the close, the NYSE was up .6%, the SP 500 was up .3%, and the DJIA was flat. The Nasdaq finished lower but the intraday support and positive action by the close is something that has to be considered positive overall. I mean obviously if this market was real weak they would have sold them into the close.
One of the bright spots on Friday's trading came via the IBD indexes. The IBD 85-85 index added 1.1% on Friday which was much better than the NYSE's .60% gain which shows that leading stocks are still slowly making a rotation into stronger leaders.
The odd thing though is it does not show up in the accumulation/distribution ratings of the indexes in Investors Business Daily. The Nasdaq is the best index with an A rating for acc/dis, the SP 500 has a B+, the NYSE sports a strong B rating for acc/dis, and the IBD 85-85 has that C+ rating that I have already mentioned.
This C+ rating is probably going to go away soon as the rotation from past leading ag, oil, steel, and metal stocks moves into retail, technology, and financial stocks. When this rotation is over and the new leaders are ready to run the acc/dis rating will rise and that will confirm that it is a powerful new bull market.
Remember, we are rallying on lower volume on both indexes. It is only recently that the Nasdaq has seen volume start to come in above average on that index. For the NYSE, however, I believe it is now 30 days (a full month) in a row that the NYSE has closed on below average volume.
Now, while there is nothing wrong with making a good amount of money in a low volume general market rally, as long as the stocks we are going long are moving up on higher volume, we still have to be careful about marrying the market's bias here until we start to see some heavy volume return.
It is very obvious that the crowd has turned bullish recently, via the 55% bullish reading on the AAII survey, but that amount of bullishness has not translated into the crowd acting upon that. In the other survey, which I find MUCH MORE IMPORTANT, bulls are beating bears 40.9% to 31.8% but the bears were beating bulls for almost a full month. That was the first time since late 2005 that bears crossed bulls and was the first time that I can remember since 2002/2003 where the bears beat the bulls for more than a week. So the crowd is turning a little bullish by what they say but how are they acting?
Mutual funds are still hoarding cash as the levels rise in a lot of funds (like I have said before, I have not seen this much cash since 2001-2002 in leading growth funds). Along with mutual funds still yet to get back to work, we have the retail crowd still buying puts and shorting stocks. That can be seen by watching our put/call ratio. This ratio barely EVER goes under .80 anymore. This is a byproduct of the dumb money constantly seeing every rally as a chance to short. That can be seen in the most recent data as the put/call ratio jumped from .81 to .88 after a huge Thursday rally in the Nassy. It fell slightly this weekend to .84 but it is still above that .80 level. While a reading of 1 or higher is a reading of a crowd that is bearish, being at .80 is no bullish matter either. A reading around .80 to 1.6 can be considered bullish for stocks as a contrarian.
On top of this investment vehicle showing that the crowd still has a slight "let's short this market" bias is the recently important NYSE short-interest ratio. This key indicator of how the dumb money is investing is showing that the crowd continue to believe shorting this market is the right play as we must be in a recession. Considering a recession is back to back quarters of negative GDP growth, it is clearly obvious to me that a reading of positive .6% is not a negative number. So for all of those for sure we are in a recession I have a bit of a newsflash. You are going to be waiting a long time. There is not a recession out there. There is simply a slowdown. Yet here people are shorting stocks like it is the right play. This has caused the ratio to hit YET ANOTHER ALL-TIME high after Friday's session of 12.58. It now takes almost a full 13 days of average NYSE volume to clean out the shorts.
This might be why we are seeing the market rally for such a long time on low volume. As long as the dumb money is out there buying puts (that they have no business buying), selling stocks shorts, or selling stocks rising higher, then you can be sure this low volume rally, along with the way momentum works, will lead us to a market that should continue to see solid gains. A market, who's rally is not believed, can be a market that rises on low volume for a very long time. As long as the crowd wants to short stocks into a rising market, you can be sure there will be shorts from lower levels that will be squeezed and forced to cover their shorts as they sell them at higher and higher prices. As these past shorts are then forced to cover stock that can't be found the stock will be forced to rise until more sellers come out to sell the stock. If those sellers are short-sellers, then later on they will be squeezed and this game can continue on and on, until volume to the downside finally returns. But most of the time the heavy volume selling does not follow a low volume rally that has lasted this long.
Normally, a low volume rally that has lasted at least a month, historically, turns into a rally that rises on heavy volume. But once most players realize their shorting of a low volume rally has turned into a runaway bull market and they now see that THEY MUST BUY and get long, that is usually when the rally is dead and the heavy volume selling returns. Right now, in this market, the way charts are setting up in sound bases all over the place, it appears that a further continuation of this rally would be what the good doctor ordered.
There are multiple other signs that indicate that the worst may be behind us in the market via the way the sector leadership and rotation seems to be playing out. The CRB index, to me, appears to be making a very short term almost tweezer like double top. The first week's selloff was a nasty 10% hit and this weeks hit was almost 5% until Friday's rise. That, after the slow rise, seemed to be very bearish. Watching an index slowly take its time hitting new highs and then seeing it reverse HARD right afterwards always makes me nervous as historically it has signaled tops.
On my weekly CRB index chart, I have negative divergence in the TSV, moneystream, and RS line, as they are all making lower highs, while price makes higher highs. The new high was barely a new high but considering all these indicators could not keep up with price is a huge hint that momentum is waining. The strength in these stocks was obviously the reason why the best stocks of the rally were ag, oil, steel, cyclicals, and gold stocks. However, with the selloff in these stocks , along with the CRB looking like it is, it is possible there could be a rotation of these stocks into the stocks that are showing VERY bullish chart action by either setting up bases, putting in what does look like REAL HEAVY volume bottoms, or breaking out of well formed patterns. Those charts are all over the place but are MOST obvious to me in the financials, retail, and technology stocks.
These stocks are setting up everywhere with green to max green BOP charts. Even though I still do not have anything perfect out there setting up in a perfect base with a perfect price, volume, and BOP setup, I still see stocks all over the place that are in early stages of a base building period or are racing up the right side of the charts that with one more base building area would in fact possibly be great charts. I have my eye on quite a few but every day more and more pop up which is a clearly healthy development for this market. This action was NOT seen during any other period since the November top where the big-cap tech stocks all started their journey lower.
I guess you can say oil, gas, and steel stocks are still the leaders. But in the past week we have seen six new industry groups enter the top 20 of all industry groups in IBD. I focus on this list the most when I am looking for future potential longs in bull markets as 37% of a stocks move is completely correlated to its industry group. You may find one or two gems in a weak industry group but normally, unless the stock is extremely powerful and strong, you are simply not going to find stocks that can move with such certainty and ease as a leading issue. The groups that are starting to climb higher that are not in the top 20 yet are also key areas of interest and I see a lot of technology related groups climbing which makes me excited.
However, remember, just because a group makes the list does not mean it is for certain to be a leader. Good thing for us, because if you remember, at the start of the year, medical stocks made up 10 of top 20 industry groups. How many are there now? One. Medical-Hospitals. And while there is not a lot of high tech in this group YET the new groups in this list still are loaded with leaders. Especially the transportation groups which make up three of top 12 industry groups after Friday's close. This should be no surprise for those of us that follow the leaders. These stocks have been showing up in my dynamic price/volume scans for about three months now, which proves they were starting to show leadership even before the whole group was. Leaders like CHRW, AAWW, and GWR clearly stand out in my scans. Also the DJ Transportation average is the leading index since January 1, 2008 is up 16% which is only one of two industry indexes higher since 1/1/2008. The other is the Consumer Index which is up 1.7%. Clearly it is all about Transportation stocks.
That is why 45% of the Transportation-Railroad stocks hit brand new 52-week highs on Friday. The Transportation-Trucking index has risen from #183 six months ago to #12 which can only be outdone by the Building-Res/Comm group which has moved from the worst spot at #197 five months ago to #5.
Sticking with the theme of strength, some of the other great industry groups on Friday came from groups already near the top. The top Oil&Gas-US Expl/Prod remains on top and gained 1.8% but within the top 20 Steel-Producers rose 2.4%, Energy-Other rose 2.8%, Chemical-Fertilizers rose 2.2%, Machinery-Construction/Man. rose 2.4%, the Metal Ore group rose 3.1%, and the Oil&Gas-Drilling stocks powered ahead an impressive 3.8% gain. This was a good showing amongst top stocks even though SOME of these groups (like chem-fert) appear to be topping and rotating into new tech related stocks. On the other end of the spectrum more good news can be said about the bottom 20 groups as six of the 10 worst groups on Friday were in the bottom 20. This is a good market that is rewarding leaders and punishing laggards. This is how it is supposed to be. It has been about a LONG TIME since the market has acted appropriately.
Even though we did make good money in 2006 and 2007, the low VIX along with the lame action of the overall market made it very hard to rack up huge gains. The constant choppiness of the overall uptrend and lack of any big moves made it tough. There is and was no doubt about that. Before this month, the past six months were the hardest period for yours truly to make big money. I simply had never gone through such an odd period where EVERY LARGE purchase/short made by me either failed or barely worked and EVERY!!!! marginal long/short would end up being GREAT trades. That helped lead me to a 2% gain to an 8% loss (which STILL kept me within the top 5% of all mutual funds which is ALWAYS my goal in bear markets; in bull markets I want to be within the top 2% of all funds!!!!!!!!!!!!!!!!!!!!!!!!!!!!!--I have been around too long now to want to just be in the top 5%) on 5 different accounts that I run during that time. The overall return was a gain of 2%. But April came in and went out with a bang And so far May is starting itself out on the right foot as Thursday and Friday were very good to my portfolio.
The biggest problem I had with my portfolio from November to January was the fact EVERY short I loaded up on did not do that well while EVERY short I took small positions on DID WONDERFUL! That along with longs that did show not doing well, made it a rough period. Remember, in January 10 NEW industry groups entered the top 20 groups. THEY WERE ALL MEDICAL. To me that means that medical stocks are about to become your NEXT BIG WINNERS during the market downtrend. Since medical stocks lead in bear markets, I naturally assumed the way things were going that the downtrend would stay.
But come 1/22 and 1/23 the downtrend ran into Fed liquidity pressure and the selling was done. Not only that but the defensive stocks then reversed and the leading medical stocks started breaking down. However, while waiting for more shorts to setup, it became clear cash was king and cash remained king for a few months. So the right play turned out to be cash. Thankfully I did that, instead of forcing shorts, as that allowed me to take that cash and IMMEDIATELY convert it into new long positions once hot charts like HA started showing up. Obviously, staying nimble in this market is a must.
For now the leaders look great and on Friday for the first time during any market session where the action was mixed, new highs still comfortably beat new lows. There were 137 new 52-week highs to 83 new 52-week lows. This clearly tells me that the overall action UNDERNEATH the market has FINALLY turned bullish. Like I just said, this is the first mixed session, that STARTED weak, and ended up with a mixed close that saw new highs kill new lows. This is a very good thing and continues a SLOW rotation from a weak market to a strong market.
Some of our new leadership is now becoming more clear and if some of you do not know where that is I am going to list some groups that could continue to outshine in this market and some stocks that could be monster stocks with more accumulation and mutual fund support. The new batch of leaders are coming out of the Banks (18 new highs on Friday)-ITU, BBD, UBB, CIB, BAP, UMBF, and RBCAA. The Medical group (14)-LSR, ICLR, AMED, BABY, PRGO, and GILD. The Energy group (14)-SPN SM PQ. The Transportation group-TGH, BNI, GWR, CHRW, AAWW, CSX, and KSU. The Electronics (7)-TTMI, DRS, CLS, GLW, APH, and AXYS. Utility (6)-NFG, CPL, and LG. Business Services (6)-WW, UNF, WWIN, and VISN. Savings&loans (5)-LABC, OCFC, and HCBK. Machinery (5)-GHM, JST, BMI, and CIR. Food/Beverage (5)-SDA, FLO, and OME. Retail (5)-CBD ARO. Internet-SOHU, NTES, and ELNK.
If this trend of stocks continue to show up in our new high list, I am sure it will not be too much longer until EVER day higher on the Nasdaq and NYSE is on above average daily volume. The YHOO and MSFT deal has fallen apart and if that ends up helping MSFT which makes up almost 7% of the Nasdaq, I have a feeling tomorrow could be a great confirmation day follow-through for the current rally. However, if it just ends up being a low volume rally on Monday, and I still get plenty of GENC and HA type of action, I will be more than happy to take that. We will see where tomorrow brings us but so far it is a possible trip to "MONSTER STOCK RETURN" land. I hope that is the case! I have been waiting a VERY LONG TIME for a chance to make some VERY BIG MONEY. Since the November top, it has been like pulling teeth. Hopefully, we are through with that low follow-through stage.
Aloha and I will see you in the chat room where stock picks turn into stock winners as long as you buy the best, cut your losses on your worst, and learn when to sell near the top when you get it really right. We have a lot of chat room member but a LOT OF YOU OLD TIMERS WITH EXPERIENCE WHO ARE STILL WITH US HAVE NOT BEEN SHOWING UP NEARLY AS MUCH AS YOU USED TO. IF THIS MARKET IS TURNING, I SURE WOULD APPRECIATE IT IF YOU GOT YOUR MONEYS WORTH AND MADE AN APPEARANCE IN THE CHAT ROOM SOMETIME BEFORE THE CLOSING BELL. There are a LOT of new guys that need more wisdom, guidance, and experience from regular members. So hopefully more than 20 of you can show up at once. The herd has been small and I hope the experienced guys that are showing up less and less (YOU KNOW WHO YOU ARE AND YES! I AM TALKING ABOUT YOU) are still watching the market as close as they were when the time wasn't right. Now that the time is right to make money, I recommend you get yourself into the game before I start hearing statements like "dang, I missed that one. I should have been paying closer attention but I thought it was OK to go away." Missing the next HRZ (the most recent 'Past Big Winner' posted) is inexcusable.
Great luck and stay disciplined! ALOOOOOOHA!!
Wednesday, April 30, 2008
Another Very Quiet Day And Another Very Bullish Day For Our Longs; Fed Meeting Should Produce A One And Done...
It was a very quiet day of trading and until the very last hour appeared to be the lowest volume day the entire year. However, a pickup in action the past hour prevented that from happening. But instead of a rush to buy stocks there was a small little rush to sell. That helped take the indexes off their highs and helped leave them basically flat for the day with most indexes up or down between up .1% and down .2%. The biggest moving index was the SP 600 with a walloping .6% rally.
Leading stocks, in the form of the IBD 100 fell .4% but many stocks that make up this index look great, pulled back on lower volume, or actually moved higher on higher volume. Some of the bright spots that I am not long (no free picks :)) include ACL SINA STR SOHU CMI NTES and ARD. Some of the dark spots were the chemical-fertilizer stocks that are in the middle of ANOTHER possible topping process. This topping looks so much more real this time as not only is TNH in a climax run but POT MOS CF and AGU on weekly charts going back to 2002 show stocks that have gone from a sustained slight uptrend, to a strong uptrend, to an exponential uptrend, to a powerful exponential uptrend, to a parabolic uptrend, to a climatic possible top this month. With these stocks selling off in a climatic topping fashion and with so many tech, retail, bank, and other lagging stocks looking good, it does appear that this is a massive rotation. I think that is a very good thing, if not now, for the future.
The mixed results came on lower volume as volume contracted around 10% on both indexes as most investors are in a holding pattern waiting for the Fed to come out with their announcement. Even though I do not care about this really, the truth is the overall trend is very important and that trend could be coming to an end as the Fed is expected to lower rates one final time as inflation is finally starting to worry them more than economic weakness. This move might be taken as the signal for investors to get back to work.
This is all wishful thinking. But my hope is that by signaling that they are done cutting, the big elephants (mutual, pension, trust funds) will start to put money back to work and will go out looking for money knowing that they will not be able to get a better deal on their financing down the road. But, if you are in that wishful thinking cap you have to be cautious when you here that Warren Buffett thinks that this will be a really bad recession that will last longer and be deeper than we think. I could see that happening also, so I am not so sure I am even confident with my wishful thinking best case scenario.
What I am hoping for is for the Fed to change the wording in their announcement that would somehow signal to investors that the rate cuts are finally over and now the Fed will be waiting for the next move which historically, after this many cuts, is higher. That means the next time the Fed will raise rates, they will know that the economy is strong and that they will need to cool it off.
All I know is that I see a LOT of mutual fund cash just piling up in some great mutual funds that have some experienced fund managers with excellent long-term track records. Those guys are going to eventually need to put that money back to work and you can bet after going this long without a TON of volume on the indexes that in the future we are not going to be able to miss these elephants as they leave their tracks all over this market. Volume has only been above average two time since 3/20 on the Nasdaq, with one of those days of above average volume coming on a triple-witching session (and even then it was only BARELY above average), and the NYSE is still waiting to see a day of above average volume since that date. It came close once, but close is not final.
This is proof that the smart money is not involved in this market and what you are all seeing is a low volume rally that is naturally lifting stock due to the fact that the market has a natural tendency to rally on low volume. This is because investors are very impatient and when they do not see rewards immediately they go out and sell stocks. The dumb retail crowd is notorious for making this bad decision. On top of this slow selling into strong bidders, many weak traders start shorting stocks which completely goes against the market axiom "never short a dull market." This short selling in a low volume market causes stocks to slowly naturally lift, which then hits the stops of the dumb money, which then raises the stocks as they are forced to cover, that covering then sends stocks higher till they break out, that then draws in more of the retail crowd who buys breakouts, that buying then leads to more short covering, and more and more amateurs continue to repeat this process until they are either all wiped out or they all turn bullish. Once this happens, then the stock can finally come down. With the NYSE short interest ratio at 11.81 I don't think we have to worry about the market falling any time too soon as the lower volume rally will continue to inflict pain on these amateur traders.
Not only is the NYSE short-interest ratio bullish for longs with it being at YET ANOTHER all-time high--it seems like it is hitting a new high EVERY day--but the put/call ratio remains high at .87. This is not extremely high which would be around 1.6 but anything over 1 is extreme. Still though, the fact the put/call can not fall below .80 is proof that every tick higher brings in more and more short sellers that are buying puts thinking the market will fall. As long as market players are buying just as many puts as calls (which is historically bullish for stocks) and shorting stocks as stocks rise, volume or no volume, I will not hesitate going long great stocks forming solid chart patterns that show excellent fundamental characteristics. I have already started to do that as this rally moves on but I am still waiting to get heavily invested as I refuse to load-up on stocks without the big boys/smart money participating.
In M&A news I was pleasantly surprised to see WWY get bought out by Mars Candy which Warren Buffett financed. What I found interesting is that if you just would have bought WWY in 1984 and held it all the way till this announcement, you would have found yourself a big slow and steady monster stock as the stock has rallied over 6,800% since then including a small dividend. Not bad at all and why I prefer holding stocks over intraday trading. However, I still think intraday trading (due to the inability to nail HUGE MONSTER STOCKS) and long-term investing (Enron, Worldcom, Adelphia, .com's) is very risky and advise against it. I believe active investing which involves holding most stocks between 6 months and 18 months is the best way to make a fortune in the stock market.
I do not think that we can expect too much action from the market before the Fed actually makes their announcement. So I would expect for the market to give us more of what we just saw today. After the Fed, I am sure there will be more action. But for now, it is best to just take it easy, stick with what is working, and leave the riff-raff alone. Enjoy the lull, there will be a lot of fireworks, I assume, after the Fed is done doing that thing they do to annoy us so well.
There is yet again another supposed to be GIANT south swell hitting the south and west shores of Maui. This is my backyard and anytime it can actually get overhead and possibilities for big drops and barrels are there, I would rather be there than watching a dead market. So I might be checking out early tomorrow, to give the platinum members a heads up. But if the market is doing something really amazing to the bull or bear side, I will make an effort to stick around to the closing bell. Until then...SURF'S UP AGAIN! and until this market gets more exciting via more volume in the overall market or we get more HOT charts like the two that subscribers know I am talking about I will continue to focus on my surfing which brings me much greater joy than a chart ever will....well I have to admit, pretty max green BOP filled charts like those you see in my 'past big winners' do make me very happy to. There just is no feeling to getting a good wave and carving it up like it was a pumpkin. I still have yet to feel ANYTHING (besides LOVE, OF COURSE!!!!) that feels as good as a nice long tube ride tucked deep in the barrel (not that I am too familiar with those with my donkey surfing and crap Maui waves).
Aloha and I will see you in the chat room, unless I am out surfing and then you can find me at either Olowalu, Breakwall, or Guardrails if it is too crowded at the two best lower west side breaks. Well, the best is Lahaina Harbor but that is for the groms that will be going pro. I have no business over there, lucky for all of you. :( ALOOOOHA!!!
Leading stocks, in the form of the IBD 100 fell .4% but many stocks that make up this index look great, pulled back on lower volume, or actually moved higher on higher volume. Some of the bright spots that I am not long (no free picks :)) include ACL SINA STR SOHU CMI NTES and ARD. Some of the dark spots were the chemical-fertilizer stocks that are in the middle of ANOTHER possible topping process. This topping looks so much more real this time as not only is TNH in a climax run but POT MOS CF and AGU on weekly charts going back to 2002 show stocks that have gone from a sustained slight uptrend, to a strong uptrend, to an exponential uptrend, to a powerful exponential uptrend, to a parabolic uptrend, to a climatic possible top this month. With these stocks selling off in a climatic topping fashion and with so many tech, retail, bank, and other lagging stocks looking good, it does appear that this is a massive rotation. I think that is a very good thing, if not now, for the future.
The mixed results came on lower volume as volume contracted around 10% on both indexes as most investors are in a holding pattern waiting for the Fed to come out with their announcement. Even though I do not care about this really, the truth is the overall trend is very important and that trend could be coming to an end as the Fed is expected to lower rates one final time as inflation is finally starting to worry them more than economic weakness. This move might be taken as the signal for investors to get back to work.
This is all wishful thinking. But my hope is that by signaling that they are done cutting, the big elephants (mutual, pension, trust funds) will start to put money back to work and will go out looking for money knowing that they will not be able to get a better deal on their financing down the road. But, if you are in that wishful thinking cap you have to be cautious when you here that Warren Buffett thinks that this will be a really bad recession that will last longer and be deeper than we think. I could see that happening also, so I am not so sure I am even confident with my wishful thinking best case scenario.
What I am hoping for is for the Fed to change the wording in their announcement that would somehow signal to investors that the rate cuts are finally over and now the Fed will be waiting for the next move which historically, after this many cuts, is higher. That means the next time the Fed will raise rates, they will know that the economy is strong and that they will need to cool it off.
All I know is that I see a LOT of mutual fund cash just piling up in some great mutual funds that have some experienced fund managers with excellent long-term track records. Those guys are going to eventually need to put that money back to work and you can bet after going this long without a TON of volume on the indexes that in the future we are not going to be able to miss these elephants as they leave their tracks all over this market. Volume has only been above average two time since 3/20 on the Nasdaq, with one of those days of above average volume coming on a triple-witching session (and even then it was only BARELY above average), and the NYSE is still waiting to see a day of above average volume since that date. It came close once, but close is not final.
This is proof that the smart money is not involved in this market and what you are all seeing is a low volume rally that is naturally lifting stock due to the fact that the market has a natural tendency to rally on low volume. This is because investors are very impatient and when they do not see rewards immediately they go out and sell stocks. The dumb retail crowd is notorious for making this bad decision. On top of this slow selling into strong bidders, many weak traders start shorting stocks which completely goes against the market axiom "never short a dull market." This short selling in a low volume market causes stocks to slowly naturally lift, which then hits the stops of the dumb money, which then raises the stocks as they are forced to cover, that covering then sends stocks higher till they break out, that then draws in more of the retail crowd who buys breakouts, that buying then leads to more short covering, and more and more amateurs continue to repeat this process until they are either all wiped out or they all turn bullish. Once this happens, then the stock can finally come down. With the NYSE short interest ratio at 11.81 I don't think we have to worry about the market falling any time too soon as the lower volume rally will continue to inflict pain on these amateur traders.
Not only is the NYSE short-interest ratio bullish for longs with it being at YET ANOTHER all-time high--it seems like it is hitting a new high EVERY day--but the put/call ratio remains high at .87. This is not extremely high which would be around 1.6 but anything over 1 is extreme. Still though, the fact the put/call can not fall below .80 is proof that every tick higher brings in more and more short sellers that are buying puts thinking the market will fall. As long as market players are buying just as many puts as calls (which is historically bullish for stocks) and shorting stocks as stocks rise, volume or no volume, I will not hesitate going long great stocks forming solid chart patterns that show excellent fundamental characteristics. I have already started to do that as this rally moves on but I am still waiting to get heavily invested as I refuse to load-up on stocks without the big boys/smart money participating.
In M&A news I was pleasantly surprised to see WWY get bought out by Mars Candy which Warren Buffett financed. What I found interesting is that if you just would have bought WWY in 1984 and held it all the way till this announcement, you would have found yourself a big slow and steady monster stock as the stock has rallied over 6,800% since then including a small dividend. Not bad at all and why I prefer holding stocks over intraday trading. However, I still think intraday trading (due to the inability to nail HUGE MONSTER STOCKS) and long-term investing (Enron, Worldcom, Adelphia, .com's) is very risky and advise against it. I believe active investing which involves holding most stocks between 6 months and 18 months is the best way to make a fortune in the stock market.
I do not think that we can expect too much action from the market before the Fed actually makes their announcement. So I would expect for the market to give us more of what we just saw today. After the Fed, I am sure there will be more action. But for now, it is best to just take it easy, stick with what is working, and leave the riff-raff alone. Enjoy the lull, there will be a lot of fireworks, I assume, after the Fed is done doing that thing they do to annoy us so well.
There is yet again another supposed to be GIANT south swell hitting the south and west shores of Maui. This is my backyard and anytime it can actually get overhead and possibilities for big drops and barrels are there, I would rather be there than watching a dead market. So I might be checking out early tomorrow, to give the platinum members a heads up. But if the market is doing something really amazing to the bull or bear side, I will make an effort to stick around to the closing bell. Until then...SURF'S UP AGAIN! and until this market gets more exciting via more volume in the overall market or we get more HOT charts like the two that subscribers know I am talking about I will continue to focus on my surfing which brings me much greater joy than a chart ever will....well I have to admit, pretty max green BOP filled charts like those you see in my 'past big winners' do make me very happy to. There just is no feeling to getting a good wave and carving it up like it was a pumpkin. I still have yet to feel ANYTHING (besides LOVE, OF COURSE!!!!) that feels as good as a nice long tube ride tucked deep in the barrel (not that I am too familiar with those with my donkey surfing and crap Maui waves).
Aloha and I will see you in the chat room, unless I am out surfing and then you can find me at either Olowalu, Breakwall, or Guardrails if it is too crowded at the two best lower west side breaks. Well, the best is Lahaina Harbor but that is for the groms that will be going pro. I have no business over there, lucky for all of you. :( ALOOOOHA!!!
Sunday, April 20, 2008
A Bullish Week Comes To A Close As Leading Stocks Lead The Market Higher; Volume Was Finally Over The 50 Day Volume Average On Friday, On The Nasdaq
Friday turned out to be one of the best days without a doubt for the stock market in 2008 as the Nassy led the way with a 2.6% gain. Why Friday? Because this rally came not only on heavier volume but came after the indexes have already had a few up days. This is a confirmation of the follow-through day as volume was sharply higher on both indexes by 20%. Not only did the gains come on higher volume but leading stocks took charge once again as many leading stocks continued to setup in what are now nice looking bases--just a week ago they were not nearly as nice (this is why it is important to ALWAYS follow the market). That is what two very strong accumulation days will do when they are within three days. There are also plenty breaking out to new highs on strong volume and the fact that they are in so many broad sectors is bullish.
Too bad the broad sectors are all commodity related stocks but heck since they are all moving higher that is your tell that the rally is back on. The Nasdaq, NYSE, DJIA, SP 600, SP 500, and IBD indexes are now in short-term and sub-intermediate term uptrends. That means that it is time to start looking to get aggressive with longs. Especially with a lot of technology stocks showing up. They may not be leading but at least they are coming along with the recent gains. This is something that has not happened since the November selloff started. This is very good news.
However, with volume still below the 50 day volume average on the NYSE and with volume just barely over the 50 DVA on the Nasdaq it is clear that funds still have not dove into buying stocks. This has either two implications as they will either return to dump stocks hard or will create the final touches of buying power that could start another leg of the longer-term uptrend since the 2002 lows. I lean on the side of them coming back in buying stocks as I have watched some of the best funds go from 3% cash to 15% to 20% cash the past six months. Quite odd and eventually they are going to have to put that money to work. We will see.
Some out there will complain that the lower volume is bearish and I can agree with them because this was an options expiration and the fact volume was so tiny indicates to me that the bull is not ultra-powerful. However, even with the volume lower, it was still higher than the even LOWER volume on the down days. This rally could prove to be very similar to the August to November 2007 rally where the best stocks only went up like 100%, but go up none-the-less they did, and that is good enough for me as it has not been the easiest market environment to make money in since January for growth investors as no trend up or down equals no lasting profits for us. To make matters worse the VIX fell below 20 intraday which means that the returns in fact will be low.
However, before the VIX could break that level, we did go long HEAVILY a few longs that produced over 10% gains this week. This should ONLY BE THE START of the moves in these stocks, if this market can last in its uptrend for at least six months. I would like a full year but those markets, historically, start with powerful rallies on heavier volume. We do not have heavy volume at all. In fact it is hard to find volume and has been that way for over twenty days now.
That move, so far, looks good as the IBD 100 outperformed the leading Nasdaq index with a 6.5% gain compared to a 4.9% gain, for the week. The SP 500 also rose 4.3%, showing the strength in this leading 100 index. This was the best week of 2008 on a price performance basis as all the index put in a fantastic showing.
And like I said it was the leading stocks that rose to the front. There were six to seven stocks the past two week that have setup in either near-perfect or perfect patterns that we have gone long. They all are showing us gains but two and one of those we have already cut. This has been a good start, especially with two stocks that start with the letter D FLYING the past two days right after we went long. I am not sure if all of you know this but that is how it NORMALLY HAPPENS in bull markets. In fact most of the longs I will go long, if they are going to end up producing a 1000% gain in six months, will normally move higher immediately.
A recent example of this is our G*** long on 4/4. It is up 45% since my purchase and the chart is nearly perfect. I have taken in 20% but expect to ride the rest to AT LEAST a 50% gain. By looking at a weekly this chart should be much higher. As for the stock up 21.5% in the two days since we went long, I am honestly looking for AT LEAST a 100% gain in six months. Anything less from either one of these will be a HUGE disappointment.
There are a lot of past leaders mixed with a few new leaders that are starting to show solid chart patterns and to help guide you into the right direction I am going to list some of the best stocks with strong chart patterns and extremely strong fundamentals that would make good buys if they either setup in a proper base or pulled back on low volume and then moved higher on strong volume. AMZN, AGU, BIDU, TTES, TNH, KWK, BUCY, CAT, GTLS, BMI , HAL, SID, MON, and TITN are all very strong stocks. I am long a few of those names in there and all the stocks I am long in that list are making me money. This market is clearly in the direction that favors the bulls. It is nice to finally see some nice round bases setting up out there. It has been six months since APPY produced a 130% gain, DRYS a 100% gain, MTL a 90% gain, and VMW a 65% gain in a little over one month. Even if it only last a month, I will be happy to finally get something instead of nothing which has basically been the case since January 22nd as the stock market traded in a low volume tight range. Thankfully, that appears over.
Some excellent technicals that I see underneath this market, regarding the indexes, come in the form of the ACC/DIS ratings in the index. About a month ago all the indexes were mired in the D to E range. However, now, they are all at least B's. The Nasdaq is in the best shape with an A rating, the SP 500 has a B+, the NYSE has a B, and the IBD 100 and IBD 85-85 have a B-. This is excellent and shows that, even though the big boys are not loading up on stocks, at least whoever is is buying them and not selling them as an A or B rating is accumulation.
Stocks started shaping up nicely the past few weeks as a few more charts kept showing up each day with a bit more solid pattern than the day before. This finally climaxed on Friday, after GOOG jumped 20% and 89 points helping to send stocks higher everywhere. That for some odd reason was all it has now taken to put most stocks in uptrends. There are still a ton of flaws out there and beside ONE SINGLE STOCK out of 10,000, there is NOTHING setting up in a nice long-term perfect base or has a long-term uptrend with a ton of volume and max green BOP that could setup in a nice perfect base. It appears it will still take at least another month of the max green BOP charts to look right and have enough time pass by to not have the downtrend effect the rise in the stock. Things are looking better but there is still a long way to go. By next month there needs to be AT LEAST 1-3 more stocks that look like that one stock that all subscribers know that I am talking about.
The move the past week is a perfect example of why you never see me take time off from the market. I am always purging my watchlist of weak stocks and replacing them with top stocks that are nearing new highs, under heavy accumulation, and have great fundamentals. If stocks start selling off on heavy volume or somehow get relatively weak compared to the market, they are taken off the list and replaced by new leaders. This keeps me focused on the best stocks in the best sectors which is where I want to be as they produce the best returns. Are any of you watching those bank stocks? Do you see how they are only returning 25% or lower? Compare that to my XIDE, GENC, NEU, MTL, or FEED long. They are all up 32% or more during the same time. Not good bottom fishers. Another lesson for all of those who want to learn how to invest in the market correctly spending the least amount of time per day so that you can ENJOY YOUR LIFE and not sit in front of a computer screen checking quotes all day. Not what I call a great life. I prefer the nice warm sun and ocean, thank you very much.
Speaking of bank stocks. I notice something key that you normally see when selling is washed out. Now, remember, the homebuilder stocks have been rallying on HUGE volume recently making it appear they have bottom. With that, the big banks look similar. One of those is C. C has just put out earnings showing losses of $13 billion, yet the stock rallied 4.5% on the day. This is proof, once again, that the chart knows all as the news was priced into C's stock a long time ago when the stock started breaking down. Now that such a huge loss is accompanied by a 4.5% stock gain, I think it is safe to say the market is washed out a bit here.
I wonder why? Let's see. We have a media that hates this President so much that they are wiling to lie, lie, and lie some more. Instead of telling us the truth about the millions of jobs created, the all-time household net worth and home ownership, and a strong stock market, they focused non-stop on the negatives and only once it got real bad and it was confirmed did they come out in full force. They talk about the mortgage problems, the banks, the bankruptcies, the loan delinquencies, layoffs, slow wage growth, gasoline, natural gas, jobless rate, Iran, Iraq, Afghanistan, China, North Korea, Tibet, and global warming. No wonder the crowd is so bearish.
The crowd is so bearish that almost 50% are bears according to the AAII poll of individual investors. Along with that 38% are bears on the Investors Intelligence survey compared to 37% bulls. Normally bears only cross the bears to the upside near bottoms. With this market slowly starting to turn around, with these kind of bearish sentiment indicators, we have to be on the lookout for higher volume to complete the "all-in" signal.
There are other sentiment polls that line up well too, including the University of Michigan reading that showed the crowd the most pessimistic in 26 years. The IBD/TIP poll came out a day before that confirmed that with the poll coming in under 40 for the first time ever. If that is not a negative reading, considering how bearish it got during the 2001-2002 swoon, I wonder what is. Bottoms normally form with extreme pessimism. I am not sure if this is it with the negativity being at 26 and all-time lows and with bears well over bulls in the two surveys but if I had to take a guess if this was a bottom, I would say it very well could be. All that is missing is more HOT charts and volume. Sentiment, leadership, and a market in an uptrend is all there.
I definitely believe you should be long now (around 60% long, 40% cash is where I stand w/ 1% of those totals in 12 short positions) as I am starting to see some nice charts out there. They are not perfect but there is one that is and there are a few more that could be. Everything just looks real solid and the best part is that the leading stocks in the top 20 industry group continue to rally on strong volume. As long as these leading stocks are taking control, I will play those along to the upside until I can get some near-perfect to perfect stock charts setting up and breaking out. It is safe to be long and trust me if this is a start of a new uptrend, you have NOT missed anything yet.
If you were one of those people long the market after the very first big rally, chances are you were long the entire way down from 2000. Good luck investing like that for a living for a long period of time. I have been doing this since 1998 and KNOW that I will be able to use this exact methodology till the day I die. Stocks like XIDE, NEU, MCF, MA, IHS, EBIX, GENC, MTL, CMP, and MCF prove that!!! If you study the past you will be rewarded in the future. I have done my homework going back to 1880 and I understand that because humans NEVER change and emotions are always the same, for as long as humans have existed. Greed, fear, pain, euphoria, pain, joy, and anger have existed since the dawn of time and will till the end of time.
Speaking of fear. A lot of people are fearful that the dollar is going to be worthless in the future. Maybe that is why so many people are shoring stocks. I would love to see this rally continue for a full year with as many HOT max green BOP heavily accumulated perfect price action charts setting up as did in 1999 and 2003. However, anything can happen. But it does help that the NYSE short-interest ratio is yet AGAIN! AT ANOTHER NEW ALL-TIME HIGH AT 10.95! It is amazing. As the stock market rallies, more and more people are shorting this market.
Everyone, can you imagine, what the rally might be like if all those growth and value mutual funds with strong performance track records come in and start buying the greatest stocks in bulk and that then forces the emotional shorts to start covering. If it took them two full days to cover, thus getting the NYSE short-interest down to 9, and the mutual funds went to work during that time, we could see some incredible gains. And something tells me that they would want to put money to work soon as bonds are starting to look very unattractive at the short-end. But the very bullish slope of the yield-curve should be very bullish for stocks. The slope is about as good as it gets.
Getting to some more internals, I have already told you how I don't like that the VIX is already trading below 20 on an intraday basis. On top of that complacency, even though the uptrend has already started, the put/call has already fallen to .77. But this might have been more related to options expiration than traders overall mood. I will look at the closing figure on Monday to make that decision. New highs are also taking care of new lows (on a 52-week basis) 192 to 65 which is yet another day of gains and another day of new highs beating new lows. This is a major turn as we have not seen two out of three days with gains and with new highs beating new lows in two of the three. Quite impressive. But not nearly as impressive as knowing that 63 of the new highs are in the energy sector and the next closes only has 9 stocks in the group. So there should be no questions about which groups are leading. It is obviously the energy group which is loaded with solar, gas, and oil stocks.
Once again, this was the best week of the year, not only for the indexes but for my leading stocks and my longs. This hopefully is just the start of what should be a profitable uptrend. However, until I see a LOT MORE volume come in on the days when we are up 2% to 5%, there is no way I am going to be a "raging bull." Instead I will enjoy my "mini bull" status and play the few stocks that say "buy me" while I wait for the real buying to start. If it starts. We have the right sentiment, a lot of short sellers, and the uptrends for it to happen. Now all we need to have happen is for "it" to happen.
It was a slow start after the follow-through day but we are starting to build steam. There is nothing that says this has to continue and we could rollover. That is why it will be so important here to watch volume. We need to see more volume above average on the days we move higher. Don't forget everything is not hunky-dory. ISRG lost 17% and was a full sell (total loss 15% on less than 1% of my accounts). This is not a surprise and this is the reason I TOLD YOU TO NOT LOAD UP ON ISRG. I warned of going long "former past big winners" that EVERYONE now sees. BIDU is one I am personally watching to go long because it is Chinese. But RIMM, GRMN, GOOG, YHOO, AMZN, AAPL are all stocks that I really almost have no interest in going long UNLESS they setup and breakout from a pattern like AAPL did in 2004. If they do that, then sure I will go long. But I have a feeling those that I listed are a bit too old to be the "next fresh big winner." FSLR could be and BIDU could be but I truly doubt any other big boy can repeat what they have already done.
As long as the headlines remain negative, I will remain bullish. It is going to take some more volume to the upside or downside before I commit to a side but for now the trend is my friend and on the short and sub-int it is up and I have a few stocks that say it is time to get long. So that is my plan. Be careful, remember to keep a good amount 25% to 50% cash handy for possible new buys of future perfect charts or extremely powerful CANSLIM stocks. There have been a few gems but so far I am left wondering when the rest will show up. They better show up or else we will not last in a rally for too long. Great luck out there and I will see you in the chat room.
Too bad the broad sectors are all commodity related stocks but heck since they are all moving higher that is your tell that the rally is back on. The Nasdaq, NYSE, DJIA, SP 600, SP 500, and IBD indexes are now in short-term and sub-intermediate term uptrends. That means that it is time to start looking to get aggressive with longs. Especially with a lot of technology stocks showing up. They may not be leading but at least they are coming along with the recent gains. This is something that has not happened since the November selloff started. This is very good news.
However, with volume still below the 50 day volume average on the NYSE and with volume just barely over the 50 DVA on the Nasdaq it is clear that funds still have not dove into buying stocks. This has either two implications as they will either return to dump stocks hard or will create the final touches of buying power that could start another leg of the longer-term uptrend since the 2002 lows. I lean on the side of them coming back in buying stocks as I have watched some of the best funds go from 3% cash to 15% to 20% cash the past six months. Quite odd and eventually they are going to have to put that money to work. We will see.
Some out there will complain that the lower volume is bearish and I can agree with them because this was an options expiration and the fact volume was so tiny indicates to me that the bull is not ultra-powerful. However, even with the volume lower, it was still higher than the even LOWER volume on the down days. This rally could prove to be very similar to the August to November 2007 rally where the best stocks only went up like 100%, but go up none-the-less they did, and that is good enough for me as it has not been the easiest market environment to make money in since January for growth investors as no trend up or down equals no lasting profits for us. To make matters worse the VIX fell below 20 intraday which means that the returns in fact will be low.
However, before the VIX could break that level, we did go long HEAVILY a few longs that produced over 10% gains this week. This should ONLY BE THE START of the moves in these stocks, if this market can last in its uptrend for at least six months. I would like a full year but those markets, historically, start with powerful rallies on heavier volume. We do not have heavy volume at all. In fact it is hard to find volume and has been that way for over twenty days now.
That move, so far, looks good as the IBD 100 outperformed the leading Nasdaq index with a 6.5% gain compared to a 4.9% gain, for the week. The SP 500 also rose 4.3%, showing the strength in this leading 100 index. This was the best week of 2008 on a price performance basis as all the index put in a fantastic showing.
And like I said it was the leading stocks that rose to the front. There were six to seven stocks the past two week that have setup in either near-perfect or perfect patterns that we have gone long. They all are showing us gains but two and one of those we have already cut. This has been a good start, especially with two stocks that start with the letter D FLYING the past two days right after we went long. I am not sure if all of you know this but that is how it NORMALLY HAPPENS in bull markets. In fact most of the longs I will go long, if they are going to end up producing a 1000% gain in six months, will normally move higher immediately.
A recent example of this is our G*** long on 4/4. It is up 45% since my purchase and the chart is nearly perfect. I have taken in 20% but expect to ride the rest to AT LEAST a 50% gain. By looking at a weekly this chart should be much higher. As for the stock up 21.5% in the two days since we went long, I am honestly looking for AT LEAST a 100% gain in six months. Anything less from either one of these will be a HUGE disappointment.
There are a lot of past leaders mixed with a few new leaders that are starting to show solid chart patterns and to help guide you into the right direction I am going to list some of the best stocks with strong chart patterns and extremely strong fundamentals that would make good buys if they either setup in a proper base or pulled back on low volume and then moved higher on strong volume. AMZN, AGU, BIDU, TTES, TNH, KWK, BUCY, CAT, GTLS, BMI , HAL, SID, MON, and TITN are all very strong stocks. I am long a few of those names in there and all the stocks I am long in that list are making me money. This market is clearly in the direction that favors the bulls. It is nice to finally see some nice round bases setting up out there. It has been six months since APPY produced a 130% gain, DRYS a 100% gain, MTL a 90% gain, and VMW a 65% gain in a little over one month. Even if it only last a month, I will be happy to finally get something instead of nothing which has basically been the case since January 22nd as the stock market traded in a low volume tight range. Thankfully, that appears over.
Some excellent technicals that I see underneath this market, regarding the indexes, come in the form of the ACC/DIS ratings in the index. About a month ago all the indexes were mired in the D to E range. However, now, they are all at least B's. The Nasdaq is in the best shape with an A rating, the SP 500 has a B+, the NYSE has a B, and the IBD 100 and IBD 85-85 have a B-. This is excellent and shows that, even though the big boys are not loading up on stocks, at least whoever is is buying them and not selling them as an A or B rating is accumulation.
Stocks started shaping up nicely the past few weeks as a few more charts kept showing up each day with a bit more solid pattern than the day before. This finally climaxed on Friday, after GOOG jumped 20% and 89 points helping to send stocks higher everywhere. That for some odd reason was all it has now taken to put most stocks in uptrends. There are still a ton of flaws out there and beside ONE SINGLE STOCK out of 10,000, there is NOTHING setting up in a nice long-term perfect base or has a long-term uptrend with a ton of volume and max green BOP that could setup in a nice perfect base. It appears it will still take at least another month of the max green BOP charts to look right and have enough time pass by to not have the downtrend effect the rise in the stock. Things are looking better but there is still a long way to go. By next month there needs to be AT LEAST 1-3 more stocks that look like that one stock that all subscribers know that I am talking about.
The move the past week is a perfect example of why you never see me take time off from the market. I am always purging my watchlist of weak stocks and replacing them with top stocks that are nearing new highs, under heavy accumulation, and have great fundamentals. If stocks start selling off on heavy volume or somehow get relatively weak compared to the market, they are taken off the list and replaced by new leaders. This keeps me focused on the best stocks in the best sectors which is where I want to be as they produce the best returns. Are any of you watching those bank stocks? Do you see how they are only returning 25% or lower? Compare that to my XIDE, GENC, NEU, MTL, or FEED long. They are all up 32% or more during the same time. Not good bottom fishers. Another lesson for all of those who want to learn how to invest in the market correctly spending the least amount of time per day so that you can ENJOY YOUR LIFE and not sit in front of a computer screen checking quotes all day. Not what I call a great life. I prefer the nice warm sun and ocean, thank you very much.
Speaking of bank stocks. I notice something key that you normally see when selling is washed out. Now, remember, the homebuilder stocks have been rallying on HUGE volume recently making it appear they have bottom. With that, the big banks look similar. One of those is C. C has just put out earnings showing losses of $13 billion, yet the stock rallied 4.5% on the day. This is proof, once again, that the chart knows all as the news was priced into C's stock a long time ago when the stock started breaking down. Now that such a huge loss is accompanied by a 4.5% stock gain, I think it is safe to say the market is washed out a bit here.
I wonder why? Let's see. We have a media that hates this President so much that they are wiling to lie, lie, and lie some more. Instead of telling us the truth about the millions of jobs created, the all-time household net worth and home ownership, and a strong stock market, they focused non-stop on the negatives and only once it got real bad and it was confirmed did they come out in full force. They talk about the mortgage problems, the banks, the bankruptcies, the loan delinquencies, layoffs, slow wage growth, gasoline, natural gas, jobless rate, Iran, Iraq, Afghanistan, China, North Korea, Tibet, and global warming. No wonder the crowd is so bearish.
The crowd is so bearish that almost 50% are bears according to the AAII poll of individual investors. Along with that 38% are bears on the Investors Intelligence survey compared to 37% bulls. Normally bears only cross the bears to the upside near bottoms. With this market slowly starting to turn around, with these kind of bearish sentiment indicators, we have to be on the lookout for higher volume to complete the "all-in" signal.
There are other sentiment polls that line up well too, including the University of Michigan reading that showed the crowd the most pessimistic in 26 years. The IBD/TIP poll came out a day before that confirmed that with the poll coming in under 40 for the first time ever. If that is not a negative reading, considering how bearish it got during the 2001-2002 swoon, I wonder what is. Bottoms normally form with extreme pessimism. I am not sure if this is it with the negativity being at 26 and all-time lows and with bears well over bulls in the two surveys but if I had to take a guess if this was a bottom, I would say it very well could be. All that is missing is more HOT charts and volume. Sentiment, leadership, and a market in an uptrend is all there.
I definitely believe you should be long now (around 60% long, 40% cash is where I stand w/ 1% of those totals in 12 short positions) as I am starting to see some nice charts out there. They are not perfect but there is one that is and there are a few more that could be. Everything just looks real solid and the best part is that the leading stocks in the top 20 industry group continue to rally on strong volume. As long as these leading stocks are taking control, I will play those along to the upside until I can get some near-perfect to perfect stock charts setting up and breaking out. It is safe to be long and trust me if this is a start of a new uptrend, you have NOT missed anything yet.
If you were one of those people long the market after the very first big rally, chances are you were long the entire way down from 2000. Good luck investing like that for a living for a long period of time. I have been doing this since 1998 and KNOW that I will be able to use this exact methodology till the day I die. Stocks like XIDE, NEU, MCF, MA, IHS, EBIX, GENC, MTL, CMP, and MCF prove that!!! If you study the past you will be rewarded in the future. I have done my homework going back to 1880 and I understand that because humans NEVER change and emotions are always the same, for as long as humans have existed. Greed, fear, pain, euphoria, pain, joy, and anger have existed since the dawn of time and will till the end of time.
Speaking of fear. A lot of people are fearful that the dollar is going to be worthless in the future. Maybe that is why so many people are shoring stocks. I would love to see this rally continue for a full year with as many HOT max green BOP heavily accumulated perfect price action charts setting up as did in 1999 and 2003. However, anything can happen. But it does help that the NYSE short-interest ratio is yet AGAIN! AT ANOTHER NEW ALL-TIME HIGH AT 10.95! It is amazing. As the stock market rallies, more and more people are shorting this market.
Everyone, can you imagine, what the rally might be like if all those growth and value mutual funds with strong performance track records come in and start buying the greatest stocks in bulk and that then forces the emotional shorts to start covering. If it took them two full days to cover, thus getting the NYSE short-interest down to 9, and the mutual funds went to work during that time, we could see some incredible gains. And something tells me that they would want to put money to work soon as bonds are starting to look very unattractive at the short-end. But the very bullish slope of the yield-curve should be very bullish for stocks. The slope is about as good as it gets.
Getting to some more internals, I have already told you how I don't like that the VIX is already trading below 20 on an intraday basis. On top of that complacency, even though the uptrend has already started, the put/call has already fallen to .77. But this might have been more related to options expiration than traders overall mood. I will look at the closing figure on Monday to make that decision. New highs are also taking care of new lows (on a 52-week basis) 192 to 65 which is yet another day of gains and another day of new highs beating new lows. This is a major turn as we have not seen two out of three days with gains and with new highs beating new lows in two of the three. Quite impressive. But not nearly as impressive as knowing that 63 of the new highs are in the energy sector and the next closes only has 9 stocks in the group. So there should be no questions about which groups are leading. It is obviously the energy group which is loaded with solar, gas, and oil stocks.
Once again, this was the best week of the year, not only for the indexes but for my leading stocks and my longs. This hopefully is just the start of what should be a profitable uptrend. However, until I see a LOT MORE volume come in on the days when we are up 2% to 5%, there is no way I am going to be a "raging bull." Instead I will enjoy my "mini bull" status and play the few stocks that say "buy me" while I wait for the real buying to start. If it starts. We have the right sentiment, a lot of short sellers, and the uptrends for it to happen. Now all we need to have happen is for "it" to happen.
It was a slow start after the follow-through day but we are starting to build steam. There is nothing that says this has to continue and we could rollover. That is why it will be so important here to watch volume. We need to see more volume above average on the days we move higher. Don't forget everything is not hunky-dory. ISRG lost 17% and was a full sell (total loss 15% on less than 1% of my accounts). This is not a surprise and this is the reason I TOLD YOU TO NOT LOAD UP ON ISRG. I warned of going long "former past big winners" that EVERYONE now sees. BIDU is one I am personally watching to go long because it is Chinese. But RIMM, GRMN, GOOG, YHOO, AMZN, AAPL are all stocks that I really almost have no interest in going long UNLESS they setup and breakout from a pattern like AAPL did in 2004. If they do that, then sure I will go long. But I have a feeling those that I listed are a bit too old to be the "next fresh big winner." FSLR could be and BIDU could be but I truly doubt any other big boy can repeat what they have already done.
As long as the headlines remain negative, I will remain bullish. It is going to take some more volume to the upside or downside before I commit to a side but for now the trend is my friend and on the short and sub-int it is up and I have a few stocks that say it is time to get long. So that is my plan. Be careful, remember to keep a good amount 25% to 50% cash handy for possible new buys of future perfect charts or extremely powerful CANSLIM stocks. There have been a few gems but so far I am left wondering when the rest will show up. They better show up or else we will not last in a rally for too long. Great luck out there and I will see you in the chat room.
Sunday, April 13, 2008
A Market That Moves On No Volume Should Be Treated With Caution
There is an old adage that goes "never short a dull market." I couldn't agree with that more and want to stress that it does not say "go all-in and long a dull market." No, it says, "never short a dull market." If we have to get down to the core of what that statement says it is clearly telling us that when volume is no where to be found the LAST thing you want to do is go short stocks as you are leaving yourself open to a large short-squeeze as usually happens in low volume markets. But do not think that due it saying that it is never smart to be short a dull markets that it means it is OK to load up on longs and be very long a dull market. It means to, more-or-less, MAKE SURE YOU ARE NOT SHORT but do not worry about being long either. To sum it up it is simply saying "when there is no volume you should have all cash."
For those that do not understand why this is, it is not that hard to figure out. When stocks are moving up and down with no volume they become easy to manipulate by a few and when those few are manipulating stocks can move them and make them do whatever they want. I was just reminded that watching my favorite long pullback viciously on Friday. Volume was not that much above average yet the stock lost 9%. The stock is still above three supports, has green BOP still, and the reason for the trade still exist. So I will not be scared out of this long fully. But so many will be that it just goes to show how dangerous it is to be long in this low volume market.
While everyone focuses on GE..blah, blah, blah, I remind myself how stupid this stock is by looking at the returns you would have made since the start of the year in 2000. A negative 35%. Yes buy and hold is in fact THE MOST DANGEROUS way to invest. It is PURE GAMBLING AND HOPE at its best. You decide to hold something for the long hold and you are proving you are a true gambler. History has shown us over and over and over that the great stocks of the past NEVER last in this dynamic country. Yet, here we are all focused on GE. Even though it was a market mover, it is a giant distraction from what is really important and the new blood in the market.
About the only thing I guess I can judge by overall sentiment is that it appeared most were ready for the weak numbers that would then lead to buying as all the bad news would have been priced in. Well I guess it isn't as GE broke hard right at the 200 DMA and right below the 50 DMA. Even a mid-day rally was slapped lower. Not good for this big-bellwether. However, if you focus anymore on GE, after this paragraph, you truly need to go pick up a copy of 'Monster Stocks' by Boik. GE IS DEAD. DON'T EVER LOOK AT GE AGAIN. IT IS OVER FOREVER as a growth stock. If you are an income investor, then fine, whatever, but that isn't my style.
What I find more important to focus on is all the sentiment data. The University of Michigan Consumer Confidence came it at a 26 year low for April. This extreme lows shows that the crowd is very bearish right now. Is there anything else that can confirm this? Why, yes there is. The IBD/TIPP poll just the day before saw its numbers hit the lowest it has seen since the start. That number came in below 40 which was the first time ever for that index. So both of these consumer data points show the crowd is more pessimistic on their finances since right-before President Ronald Reagan made his way into the office. God bless you Ronny! :(
The good news about this is that the crowd is always wrong. They are. It is that simple. If you are out of high-school and run with the crowd, you have serious issues and I don't think reading this blog will help. I am a leader, not a follower, and that goes to my investment philosophy. When everyone else is scared and selling, while I don't necessarily want to buy I want to watch the smart money start to buy and then piggy-back off of them.
With sentiment that low I think we have a good enough reason to believe the crowd is too bearish out there. My only problem with this is that before the crowd became so BEARISH in late 2002 to early 2003 which led to the March FTD in 2003, we had a two year plus bear market. Here we are, now, less than six months since we topped in November, yet the crowd is already MORE bearish now than then. I am not sure if this extremely low reading means that the state of the market is so bad that this extremely bearish reading is just THE START of what is about to be a VERY ugly period. Or...we really have freaked out all the weak stock holders that they have finally capitulated, gone bearish, and now see their financial mess as the worst ever.
While I am not sure where we are at, as NO ONE CAN PREDICT THE FUTURE, I do know that I would rather be looking for longs here rather than shorts, as the negative sentiment has come on very fast for a five year plus bull market. Something just seems really wrong about that but if they were somewhat bearish the WHOLE WAY up and now they feel this way-I guess it does make sense.
Confirming this sentiment, are a few other key indicators. The bulls for the third week in-a-row came in lower than bears on the investors intelligence survey. The bulls come in at 37.4% while the bears continue their reign at 38.5%. It is bullish for stocks in the intermediate term when there are more bears than bulls. Now, while this is NOT a reason to start buying stocks, it is a reason to maybe start scanning the charts looking for the next group of leaders to buy. Sadly, that new "fresh" group is not showing up yet. I still have defensive, medical, commodity--soft and hard, and envrio. related issues leading the way. Throw in tobacco stocks and you have a real exciting group of leaders.
I guess this weak leadership with a lack of volume is the reason why people are getting very short. Now, while I have no problem going short a broken stock (MICC on 4/3 for example), I do have a problem going short based on the "theory" that the market is overbought and that economy is so weak that we just can't not be short stocks. I guess this is why I see the NYSE short-interest ratio hitting a brand-new five year high of 10.50.
A short interest ratio of 10.50 indicates that it would take 10 days of average market volume to unwind all short positions. It seems to me the public is EXTREMELY short at a point when it should not be that short. Like I keep saying, shorting a dull market is not only dangerous but historically it is deadly as low-volume short-covering rallies happen often. If a short-covering rally started here and it picked up volume as it went along forcing those to cover, it could turn into a nice vicious short-covering rally.
With the low volume it could be even worse, since the big boys will be on the sidelines not selling into the gains. This could lift stocks heavily way beyond what most would assume would be "rational." Obviously, this is just something to think about as low volume rallies happen often. Especially when the put/call is at 1.25. It seems like Friday's selling did turn the crowd quite bearish after the weak GE numbers.
Too bad they did not study volume. If they would have they would have noticed it was 4% lower on the NYSE and 14% lower on the Nasdaq which clearly shows that the selling was not intense and institutions stayed on the sidelines. This kind of lame selling on such a bad day is just like a huge up day on no volume: meaningless. There is nothing to really delve into. It simply is what it is: a low volume big move.
While there are things out there that personally scare me like 4% inflation (somewhere around 7-10% on Maui) it is getting hard to buy all the goods that I like to buy. This is definitely having an impact on my accounts as the poor stock market gains combined with loss of earnings power has wreaked havoc on my lifestyle. But since I am a simple man I find it easy to adjust and when I step back and look at things overall I just don't see it that bad. People are extremely bearish right now, via sentiment polls, and when the crowd is bearish I want to be bullish. Now that I see so many weak readings out there I can tell you that I would like to get very bullish.
However, the put/call, investors intelligence, VIX, and NYSE short interest ratio are not going to make me money. What is going to make me money is price and volume. I need some hot charts forming sound bases that are followed by breakouts on strong volume. If I can get more of this action, in high quality stocks, I would be very bullish on the short term. However, the lack of volume and long quiet bases has me still thinking that we have a lot more time before we can get a real rally.
Once we get some more backing and filling in the indexes, within an overall uptrend, we can then pray that some "fine" charts setup and breakout of sound patterns that can produce for us some "monster stocks" that go on to produce large gains. A VIX at 23 might inhibit that but still, at this point, I don't care if I get a 500% return. I will be happy with a few 100% returns. It is simply impossible to get greedy in the market when there is nothing to get greedy over. There is no speculative money pushing stocks higher.
Besides no speculative big money, there is no real institutional money either, as I see a LOT of high quality funds out there carrying cash positions from 5% to 25% all over the place. These funds are going to have to put that money to work eventually and if you take a look at the yield curve you will hope that stocks is going to be where it is at as a great bullish slope of the yield curve combined with the current low returns in bonds bodes well for stocks.
LOL, In fact, I can not turn anywhere without seeing headlines like this. I blinked and saw this: The American Bankers Association recently reported that in the fourth quarter of 2007, consumer credit delinquencies reached their highest level since 1992. This is the kind of constant negative drumbeats that cause the chicken-littles to sell after they already have big losses. It is possible this is just the start of something that is going to get out of control. But the way EVERY indicator/report is bearish, I find it hard to not want to lean to be bullish. All I need now is another higher volume 3% plus gain on the indexes with more green to max green charts making bases lasting at least 5-7 weeks. If I can get that, you can see my margin being unleashed as I start to load-up on ALL the best leading stocks.
Getting to some important numbers that I see: The Nassy now has an ACC/DIS rating of A- which is NOW very bullish, to go along with all the negative headlines. Like I said all I need now is that explosive day and better charts. This is made even better knowing that the Nassy fell 2.6%, yet the IBD 100 and 85/85 fell only 2% and 2.2% respectively. This is bullish RS and divergence from the overall market.
Too bad the leading stocks that make up this index all come from the exciting (sarcasm) and dynamic (not at all as they led from 03-early 06) groups of oil&gas, steel, chemicals, energy, machinery, building, transportation, and metal ores stocks. Combine those PAST leaders with medical, pollution control, tobacco, and media groups leading the way higher and we have a market that very well could be bullish in the short to intermediate term due to EVERYTHING!!! that I have posted today in regards to the sentiment direction.
However, for the long term, if you think the stock market is going to be higher a year from now you want to be long technological and innovative companies in brand new industries that are revolutionizing the way the world runs. These current leaders will NEVER be those kind of stocks. Our current leadership of energy and medical stocks will not change the world forever or make our lives better. They may DEFINITELY in their own way via research and development. But still this is not an airplane, car, or internet.
There are things that we need to watch for, of course. If the selling starts to come back into the market we will know that the low volume rally was actually a trap for the institutions to sell into. However, we have to see that happen to believe that. For now, it appears we are ready to drift higher. If they do knock us down further it shouldn't be that much of a surprise as the indexes are all back below the 50 DMA. But it is how they act here that will determine if the future is good or bad for the market.
I am being very patient, relaxing, watching, plotting, and waiting for that moment when to go all-in to the market. I want to be long the best patterns in the best stocks that are moving the most. When I can get some volume in this market, to the upside, I would love to get very active in my favorite longs like.....yeah right! :). If we continue to selloff, I am sure we can find some past-leaders that will have setup into some perfect short positions. Either way, no matter which way the market goes, I AM READY. Make sure you are to. Up, down, or sideways. I have a plan for all and I AM READY. :)
Before I go I want to take a moment to tell everyone how much I hate CLR a stock I went long on 3/13 and sold on 3/17 and 3/20. As you can see the stock is now up 30%; I took a 12% loss on my final sell. This is how the market is right now. I see so many stocks I was long, that I sold out of being disciplined, that are now hitting new highs. This DOES NOT HAPPEN IN BULL MARKETS. And I guess that proves that this is still a very mixed and choppy market.
Be ready for anything. I am expecting more upside relief, but I do not know if it will come with low or heavy volume. If it comes on heavy volume, I will be happy as I can start getting long the best of the best for some "monster" gains. However, if we rollover I am sure some 25-50% short sell winners will setup for me.
Life is great (especially without having to read NASTY comments) and if I go out and can find some surf either north or south today will have been a great day. It already has been a rocking weekend. Let's keep it up and roll this over into the work week for me, God!!! Aloha everyone. Thank you for reading my blog. I hope this can help you make money. If it doesn't, something is wrong with you. :)....or does that mean something is wrong with me? Whatever it is, it is all good, with me.
Maui No Ka Oi! Pray for surf!!
For those that do not understand why this is, it is not that hard to figure out. When stocks are moving up and down with no volume they become easy to manipulate by a few and when those few are manipulating stocks can move them and make them do whatever they want. I was just reminded that watching my favorite long pullback viciously on Friday. Volume was not that much above average yet the stock lost 9%. The stock is still above three supports, has green BOP still, and the reason for the trade still exist. So I will not be scared out of this long fully. But so many will be that it just goes to show how dangerous it is to be long in this low volume market.
While everyone focuses on GE..blah, blah, blah, I remind myself how stupid this stock is by looking at the returns you would have made since the start of the year in 2000. A negative 35%. Yes buy and hold is in fact THE MOST DANGEROUS way to invest. It is PURE GAMBLING AND HOPE at its best. You decide to hold something for the long hold and you are proving you are a true gambler. History has shown us over and over and over that the great stocks of the past NEVER last in this dynamic country. Yet, here we are all focused on GE. Even though it was a market mover, it is a giant distraction from what is really important and the new blood in the market.
About the only thing I guess I can judge by overall sentiment is that it appeared most were ready for the weak numbers that would then lead to buying as all the bad news would have been priced in. Well I guess it isn't as GE broke hard right at the 200 DMA and right below the 50 DMA. Even a mid-day rally was slapped lower. Not good for this big-bellwether. However, if you focus anymore on GE, after this paragraph, you truly need to go pick up a copy of 'Monster Stocks' by Boik. GE IS DEAD. DON'T EVER LOOK AT GE AGAIN. IT IS OVER FOREVER as a growth stock. If you are an income investor, then fine, whatever, but that isn't my style.
What I find more important to focus on is all the sentiment data. The University of Michigan Consumer Confidence came it at a 26 year low for April. This extreme lows shows that the crowd is very bearish right now. Is there anything else that can confirm this? Why, yes there is. The IBD/TIPP poll just the day before saw its numbers hit the lowest it has seen since the start. That number came in below 40 which was the first time ever for that index. So both of these consumer data points show the crowd is more pessimistic on their finances since right-before President Ronald Reagan made his way into the office. God bless you Ronny! :(
The good news about this is that the crowd is always wrong. They are. It is that simple. If you are out of high-school and run with the crowd, you have serious issues and I don't think reading this blog will help. I am a leader, not a follower, and that goes to my investment philosophy. When everyone else is scared and selling, while I don't necessarily want to buy I want to watch the smart money start to buy and then piggy-back off of them.
With sentiment that low I think we have a good enough reason to believe the crowd is too bearish out there. My only problem with this is that before the crowd became so BEARISH in late 2002 to early 2003 which led to the March FTD in 2003, we had a two year plus bear market. Here we are, now, less than six months since we topped in November, yet the crowd is already MORE bearish now than then. I am not sure if this extremely low reading means that the state of the market is so bad that this extremely bearish reading is just THE START of what is about to be a VERY ugly period. Or...we really have freaked out all the weak stock holders that they have finally capitulated, gone bearish, and now see their financial mess as the worst ever.
While I am not sure where we are at, as NO ONE CAN PREDICT THE FUTURE, I do know that I would rather be looking for longs here rather than shorts, as the negative sentiment has come on very fast for a five year plus bull market. Something just seems really wrong about that but if they were somewhat bearish the WHOLE WAY up and now they feel this way-I guess it does make sense.
Confirming this sentiment, are a few other key indicators. The bulls for the third week in-a-row came in lower than bears on the investors intelligence survey. The bulls come in at 37.4% while the bears continue their reign at 38.5%. It is bullish for stocks in the intermediate term when there are more bears than bulls. Now, while this is NOT a reason to start buying stocks, it is a reason to maybe start scanning the charts looking for the next group of leaders to buy. Sadly, that new "fresh" group is not showing up yet. I still have defensive, medical, commodity--soft and hard, and envrio. related issues leading the way. Throw in tobacco stocks and you have a real exciting group of leaders.
I guess this weak leadership with a lack of volume is the reason why people are getting very short. Now, while I have no problem going short a broken stock (MICC on 4/3 for example), I do have a problem going short based on the "theory" that the market is overbought and that economy is so weak that we just can't not be short stocks. I guess this is why I see the NYSE short-interest ratio hitting a brand-new five year high of 10.50.
A short interest ratio of 10.50 indicates that it would take 10 days of average market volume to unwind all short positions. It seems to me the public is EXTREMELY short at a point when it should not be that short. Like I keep saying, shorting a dull market is not only dangerous but historically it is deadly as low-volume short-covering rallies happen often. If a short-covering rally started here and it picked up volume as it went along forcing those to cover, it could turn into a nice vicious short-covering rally.
With the low volume it could be even worse, since the big boys will be on the sidelines not selling into the gains. This could lift stocks heavily way beyond what most would assume would be "rational." Obviously, this is just something to think about as low volume rallies happen often. Especially when the put/call is at 1.25. It seems like Friday's selling did turn the crowd quite bearish after the weak GE numbers.
Too bad they did not study volume. If they would have they would have noticed it was 4% lower on the NYSE and 14% lower on the Nasdaq which clearly shows that the selling was not intense and institutions stayed on the sidelines. This kind of lame selling on such a bad day is just like a huge up day on no volume: meaningless. There is nothing to really delve into. It simply is what it is: a low volume big move.
While there are things out there that personally scare me like 4% inflation (somewhere around 7-10% on Maui) it is getting hard to buy all the goods that I like to buy. This is definitely having an impact on my accounts as the poor stock market gains combined with loss of earnings power has wreaked havoc on my lifestyle. But since I am a simple man I find it easy to adjust and when I step back and look at things overall I just don't see it that bad. People are extremely bearish right now, via sentiment polls, and when the crowd is bearish I want to be bullish. Now that I see so many weak readings out there I can tell you that I would like to get very bullish.
However, the put/call, investors intelligence, VIX, and NYSE short interest ratio are not going to make me money. What is going to make me money is price and volume. I need some hot charts forming sound bases that are followed by breakouts on strong volume. If I can get more of this action, in high quality stocks, I would be very bullish on the short term. However, the lack of volume and long quiet bases has me still thinking that we have a lot more time before we can get a real rally.
Once we get some more backing and filling in the indexes, within an overall uptrend, we can then pray that some "fine" charts setup and breakout of sound patterns that can produce for us some "monster stocks" that go on to produce large gains. A VIX at 23 might inhibit that but still, at this point, I don't care if I get a 500% return. I will be happy with a few 100% returns. It is simply impossible to get greedy in the market when there is nothing to get greedy over. There is no speculative money pushing stocks higher.
Besides no speculative big money, there is no real institutional money either, as I see a LOT of high quality funds out there carrying cash positions from 5% to 25% all over the place. These funds are going to have to put that money to work eventually and if you take a look at the yield curve you will hope that stocks is going to be where it is at as a great bullish slope of the yield curve combined with the current low returns in bonds bodes well for stocks.
LOL, In fact, I can not turn anywhere without seeing headlines like this. I blinked and saw this: The American Bankers Association recently reported that in the fourth quarter of 2007, consumer credit delinquencies reached their highest level since 1992. This is the kind of constant negative drumbeats that cause the chicken-littles to sell after they already have big losses. It is possible this is just the start of something that is going to get out of control. But the way EVERY indicator/report is bearish, I find it hard to not want to lean to be bullish. All I need now is another higher volume 3% plus gain on the indexes with more green to max green charts making bases lasting at least 5-7 weeks. If I can get that, you can see my margin being unleashed as I start to load-up on ALL the best leading stocks.
Getting to some important numbers that I see: The Nassy now has an ACC/DIS rating of A- which is NOW very bullish, to go along with all the negative headlines. Like I said all I need now is that explosive day and better charts. This is made even better knowing that the Nassy fell 2.6%, yet the IBD 100 and 85/85 fell only 2% and 2.2% respectively. This is bullish RS and divergence from the overall market.
Too bad the leading stocks that make up this index all come from the exciting (sarcasm) and dynamic (not at all as they led from 03-early 06) groups of oil&gas, steel, chemicals, energy, machinery, building, transportation, and metal ores stocks. Combine those PAST leaders with medical, pollution control, tobacco, and media groups leading the way higher and we have a market that very well could be bullish in the short to intermediate term due to EVERYTHING!!! that I have posted today in regards to the sentiment direction.
However, for the long term, if you think the stock market is going to be higher a year from now you want to be long technological and innovative companies in brand new industries that are revolutionizing the way the world runs. These current leaders will NEVER be those kind of stocks. Our current leadership of energy and medical stocks will not change the world forever or make our lives better. They may DEFINITELY in their own way via research and development. But still this is not an airplane, car, or internet.
There are things that we need to watch for, of course. If the selling starts to come back into the market we will know that the low volume rally was actually a trap for the institutions to sell into. However, we have to see that happen to believe that. For now, it appears we are ready to drift higher. If they do knock us down further it shouldn't be that much of a surprise as the indexes are all back below the 50 DMA. But it is how they act here that will determine if the future is good or bad for the market.
I am being very patient, relaxing, watching, plotting, and waiting for that moment when to go all-in to the market. I want to be long the best patterns in the best stocks that are moving the most. When I can get some volume in this market, to the upside, I would love to get very active in my favorite longs like.....yeah right! :). If we continue to selloff, I am sure we can find some past-leaders that will have setup into some perfect short positions. Either way, no matter which way the market goes, I AM READY. Make sure you are to. Up, down, or sideways. I have a plan for all and I AM READY. :)
Before I go I want to take a moment to tell everyone how much I hate CLR a stock I went long on 3/13 and sold on 3/17 and 3/20. As you can see the stock is now up 30%; I took a 12% loss on my final sell. This is how the market is right now. I see so many stocks I was long, that I sold out of being disciplined, that are now hitting new highs. This DOES NOT HAPPEN IN BULL MARKETS. And I guess that proves that this is still a very mixed and choppy market.
Be ready for anything. I am expecting more upside relief, but I do not know if it will come with low or heavy volume. If it comes on heavy volume, I will be happy as I can start getting long the best of the best for some "monster" gains. However, if we rollover I am sure some 25-50% short sell winners will setup for me.
Life is great (especially without having to read NASTY comments) and if I go out and can find some surf either north or south today will have been a great day. It already has been a rocking weekend. Let's keep it up and roll this over into the work week for me, God!!! Aloha everyone. Thank you for reading my blog. I hope this can help you make money. If it doesn't, something is wrong with you. :)....or does that mean something is wrong with me? Whatever it is, it is all good, with me.
Maui No Ka Oi! Pray for surf!!
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