Stocks Stage What Appears To Be A Follow-Through (Heck I’ll Call It One) But When You Look At The Market There Is No Way We Can Trust This
January 31, 2008 | Leave a Comment
I know this is an odd title but I think that we have to get into this right away. A lot of people are a little surprised that the market was up so much today. But I have been warning you that the market was going to be doing this. I was hoping that after the fakeout yesterday the last bulls would have been suckered in for the real selloff. In fact, it was the OTHER WAY AROUND, the move was made to sucker in the extremely bearish daytraders who were looking to get short the pop.
That pop convinced them that the play was right. Well, that play is right in the longer term scheme of things, but for now, the right play is to be in cash. The action today combined with the action yesterday, much less the rest of the week, is the exact reason cash is king. Heck, another reason is if you got bullish today and now you see GOOG and BIDU after-hours does that make you more bullish or cautious? And that folks is why cash is king. The trend is trendless and it is simply an intraday trader’s market.
So why am I calling this move today a follow-through day? Because as we look at all the indexes we can see that we have a move inbetween 1% to 2% on all the indexes, including a move of SP 600 and Russell 2000 of 2.7% and 2.6% respectively. Besides that volume was higher on all exchanges by a decent amount. So we now have our, what I would consider, price requirement and we have our volume requirement. So on that portion of a follow-through definition we are correct. So right now, at this moment, we have a follow through day and that is what I am basing my longs analysis off of (I am not changing it now to show you the rawness of trading and how decision must be made in time after analyzing a lot of data).
Ben The Fool Lost His Cool And Now We Are Going To Pay For It; Markets Suck In The Last Hopeful Bulls And Slams The Door In Their Face
January 30, 2008 | 10 Comments
Today was easily one of the nuttiest days I have had in a long time as a brand new subscriber shows his true colors by pumping ETFC after we had multiple private conversations about the stock. It is funny how these guys show up at the end of bull markets and during bear markets that they think are just another pullback. That kind of amateur crap, along with the shooting star chart pattern on the indexes today’s daily charts, just continues to reconfirm over and over that this market is screwed.
I definitely could be wrong, but so far I have not been. The worst part is that the market got exactly what it asked for, and insted of holding on to the gains, the market reversed after sucking in all the believers who were FOR SURE that the bottom was in shortly after 215pm EST. That kind of action convinced everyone that the bottom was in and had me prepared to call a follow-through to the market attempt. The point of that follow-through would be nothing as there are absolutely no charts that look good in leading fresh sectors. FFH, LSR, SDTH, and CZZ are not high quality stocks. They are strong. But they are nothing to give your loved ones.
I am sure I am going to be a bit all over the place with this analysis but whatever I am a professional investor not a professional editor. Anyways, the point of today’s reversal was so clear that it makes the market look that much worse. While it is true that a follow-through would have made matters worse because it would have prolonged the agony, the way the market traded today was still just as bad. Pretend like today’s intraday action was the weekly chart. Then you see how the daytraders felt. These folks who line up the chat rooms with hardcore ignorance were all over the market with their longs declaring a bottom (minus the perma bears who have been bearish since I started monitoring these rooms 10 years ago–how they still exist, I do not know). When the rally failed they did not go back to embracing the bear side till the close. And then a lot did do well but most were left holding the proverbial bag.
Stocks Spend A Slow Choppy Session Moving Slightly Higher On Mixed Volume
January 29, 2008 | 3 Comments
Stocks spent most of the day in a very boring triangular range most of the day before moving higher in a very V-shape manner. The gains, however, were not built on the back of heavy institutional buyers. They were instead bid higher by the retail crowd which shows that the big funds still show no interest what-so-ever in getting long ahead of the Fed. With volume below the 50 day volume average the past two days it is clear that Wall Street is on pause waiting for the rate cuts.
There is not much to talk about today, since nothing happened (even the put/call didn’t change: .85) today. But there is something very interesting that I read in the Big Picture in IBD that I did not previously hear about today (not sure why).
I see that the Fed lowered rates on 1/22 after the global selloff that happened the day before. However, that selloff was exacerbated due to a rogue trader at Societe Generale who lost $7 billion in France’s largest trading scandal ever. The Fed cut the rate by 75 basis points without knowing this. This came out on Thursday but since I normally don’t pay heavy attention to the Fed news I did miss this. But I think it is a big deal because like I said yesterday the Fed funds futures are predicting a 50 basis point cut with a lesser chance on 25 basis points. What happens if the Fed doesn’t cut?
The Quiet Low Volume Rally Before The Fed Storm; SP 600 Rallies 2.1% On A Very Boring Day
January 28, 2008 | 1 Comment
It was an odd day today, for me, as it seemed very boring, but yet there was the SP 600 putting in a 2.1% gain and the SP 500 rallied 1.75%. So it was a very good day. But there was no volume to today’s trading and worse yet volume was below the 50 day volume average on the Nasdaq for the first time in eight days and only the second time in fifteen days. So the low volume on top of today’s gains in a market that is still very much in a downtrend leading up to an FOMC meeting is a very dangerous market to be long.
That is probably why, despite the gains today, I found only two new longs that were both Medical stocks. The fact that the new longs continue to be almost exclusively related to the Medical field while the best trading opportunities continue to show up on the short side is a clear indication that this rally is still nothing more than a bear market bounce. I don’t care if it last only until the FOMC announcement, for one week, or a month, I just don’t think we are going to see this market hitting new highs any time in the near future. This market has some real ugly charts and the past leaders are definitely losing their ability to lead.
This ugly action is also reflected in the index charts as they have been a mess intraday recently, chopping around all over the place. Today the market was very V-shaped on its rallies and as the last hour started it appeared the market was going to give up all of its gains. But of course the volatile market was having none of that and threw it right back near the top which actually makes the market more bearish than a lower close. A low volume pullback would have been seen as bearish ahead of the meeting, unlike a lower volume rally which shows that institutions did not have any meaningful part of bidding stocks up. And it is in following these elephants that the big money is made. That big money has been in shorts. Not longs.
Very Volatile Week Ends With A Very Bearish Reversal On Lower Volume; Stocks Close Out The Week Mixed, With Big-Caps Higher And Tech Lower
January 26, 2008 | 6 Comments
A very bullish open, that I believed was going to send stocks to their follow-through day, was immediately sold and was sold the whole day, without the bulls ever getting a chance to mount a rally. Well, I guess they did near the end of the day but was anyone falling for that? By the close the 2% gain in the Nasdaq turned into a 1.5% loss as the big cap leaders and many other stocks hit resistance.
There was some good news in today’s trading and that was with the IBD 100 index which managed a .5% gain. But that is more due to the fact that this index is now getting heavier into industry groups that are moving up the industry charts while the market remains in these soon-to-be past-bull-market-winners duds. So while the indexes get trashed we will start to see the IBD 100 outperform. But as long as the charts look the way they do in that index, it doesn’t mean that it is worth buying.
Right now the chart landscape is littered with charts that are full of heavy distribution and light accumulation with very volatile price action. That is not the kind of environment where you want to be loading up on stocks that you think are bargains. If the pullback would have come on lighter volume and the volume was a tad heavier now on the rally, then I might say something different. But the problem is that there is simply no good looking charts minus a few very small-caps. But when stocks like LSR are the best of the breed, then you seriously have a market that you need to stay away from, especially if you are new to the market. Even though you might not understand it, you have to realize I can see things in the charts in a similar way a doctor can see something in an xray you would just stare blankly at. There is no difference.
Oversold Bounce Continues As Stocks Climb Higher Closing Near The Highs On Lower Volume; Day Two Of Rally Attempt (Three For SP 600/RUT)
January 24, 2008 | 1 Comment
It was an impressive day of gains for the general stock market as the main indexes rose between .9% and 1.9%, ignoring the 13% decline in 2007 existing-home sales which was the biggest drop in 25 years. However, most of the gains came early on and was followed by extremely volatile intraday price action that sent stocks all over the place on the DJIA leaving behind a very ugly intraday chart. But by the end of the day, all the indexes made a late day dash for a strong finish. If that intraday index chart of the DJIA would have been a ride I would have gotten sick. Luckily, I have learned to avoid rides like that and that is why I am holding over 50% cash. This is not a market you want to be riding. It is probably best for anyone with a longer time frame than a few days to sit this one out.
It was the second straight up day for stocks but this up day came on lower volume which is not really a big deal as the second day higher is not important. What is important is day four through 10 where we are looking for a gain of 1% or more (preferably 2%) on higher volume than the day before. If we get that, we will have officially have been given the green flag to go back to hunting for longs. However, there is no way that anything great can come from a market that was ravaged by such heavy volume selling so quickly.
Here Is The Oversold Bounce I Was Talking About; Intraday Reversal On Huge Volume Ends The Vicious Downtrend
January 23, 2008 | Leave a Comment
When I woke up today, which was an hour later than usual, I witnessed something I was not quite expecting to see: the Nasdaq was down 65 points which, I believe, was almost a 4% loss. It was something I just didn’t expect as I thought a rally was due. My first natural reaction was disappointment as I covered quiet a few shorts.
But then the bottom was put in almost immediately after I woke up. I woke up and I saw the lows and that was it. The market took off and never looked back as a stunning reversal left stock indexes up across the board on huge volume. That kind of reversal, on top of the intraday action and Fed rate cuts, is something that we can not ignore on the short term. To think that stocks should continue to move lower here is just silly, as the market has been moving straight down, falling at one point, intraday, down 16% from the December 27 selloff. It is time to stand aside and let this market get nuts, after that kind of downtrend.
A lot of people, today, have been very quick to call a bottom and I had some close personal friends ask me if the stock market bottomed today. My first reaction is where did my friends here this market news? After getting over that, I then thought to myself that if new traders are calling a bottom, my friends are asking if the market has bottomed, the Fed is still cutting interest rates, and the retail crowd is saying that they are not selling, then we can’t possibly be bottoming here.
Incredible Selloff Proves Once Again How Important It Is To Follow The Trend; Stocks Selloff On Huge Volume But Stage A Strong Intraday Session Easing The Pain
January 22, 2008 | 3 Comments
Well it was quite a night as just about everyone and his brother was very active in the stock market chat rooms over the buzz of the Asian and European markets. This was my first visual on the damage that was being done overseas and all I could think about when i saw that is “how fast can I cancel my cover orders?” and “how much money am I going to make tomorrow?” Well by the end of the day I sure did not make as much as my accounts were up at the beginning of the day but that is of no real importance as the gains were so good that it was still a great way to end the session.
By the end of the day the carnage that was left behind was quite gruesome and now has me down to only 50 longs representing a tad over 10% of my account and my short positions representing only 60% of my account from 67% on Friday as I am taking in almost 50% of my holdings to some degree. If you have any short with gains of 20% or higher, you need to take off at LEAST 25-33%. Many of my first short positions are down to only 25% or less of the original position. I have taken most of the profits and continue to roll them over into new candidates until the day comes when we can load up on AAPL BIDU RIMM GOOG FSLR and AMZN.
The way it looks out there that scenario doesn’t appear to be that much further away. We have come down so far so much that the damage that has been done to leading stocks is clear and obvious now. This will probably bring in the amateur short sellers that have been either sitting on the sidelines bad mouthing this market waiting for a “clear” moment to short and/or it will convince those history deprived “bottom callers,” “bargain hunters,” “value buyers,” and “dip buyers” to finally stop trying to buy the pullbacks and to try their hand at shorting. That is what will give the low volume rally that we will need to now enter these stocks.
Worst Week For Stocks In I Believe Five Years Leaves Behind A Wasteland Of Broken Charts
January 19, 2008 | 7 Comments
There is no other way to describe what happened this week as anything other than a major breakdown in all the major market indexes. The worst part (if you are a natural bull) is that the breakdowns now have every single major index with the 50 day moving average below the 200 day moving average. The Nasdaq was the last index to accomplish this “death cross” feat.
To make the declines this week worse, the averages sold off on heavier volume, with volume Wednesday, Thursday, and Friday on the Nasdaq reaching levels we have not seen since the mid-August sell off. The indexes are under major distribution by large institutional investors and there is no way with this amount of slow distribution (instead of a one day crash) is going to be followed, right away, by large amounts of accumulation. This market has cracked and broken wide open.
For those of you who are still bullish out there, it has to be due to ONLY one reason: you are a complete neophyte to the stock market. There can’t possibly be ANYONE who has been involved with the stock market for over a year that wants to load up on stocks here–that is except Doug Kass, my fellow colleague at RealMoney, who wants to load up on stocks here. Is he an idiot or what? This guy has been a hardcore! bear for over two years missing out on a TON of good gains (like MOS and TNH) all the while screaming about the upcoming recession. Now FINALLY he is right and he is now bullish? If there is anyone who you should probably NOT listen to about the stock market it is Doug Kass. The guy is brilliant at finding great short candidates but when it comes to the market he is about as in tune as WillPS (I love you Will, you have to realize this is for your own good but I really do want to see you succeed which is why you are being mentioned so much!!).
Another Horrible Session Leaves Bears Dancing And Bulls Trying To Find Their Head Which Was Cut Off By Those Dancing Bears; Look For A Bounce But Nothing More As Market Is Getting Oversold
January 17, 2008 | 15 Comments
Pick any of today’s headlines and all you will see is carnage. In fact, I can not remember such a horrible news day since 2001. When it came to a string of poor headlines it simply doesn’t get much worse than seeing the housing starts fell 14% to levels not seen in sixteen years. That is insane! That was just one of the problems as the others were just as bad. The Philly Fed Factory index fell to -20.9 its lowest level since October 2001 after the 9/11 attacks. And not only did MER severely disappoint with the worst earnings ever but ABK fell 52% proving that buying falling knifes, bargains, can’t pass up, and value stocks is just a FOOLS game in a bear market. WAKE UP YOU JOHNY-COME-LATELY BULLS!!!!!!!!!!!!!!!! THE TREND HAS CHANGED. ALL OF THEM: SHORT, SUB-INT, INT, AND LONG. THEY ARE ALL DOWN!!!!!!!!!! WAKE UP!!!!! DONT BE AN ARROGANT FOOL…..WILLPS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
The SP 600 is now down 21% from the highs in October to now, officially putting this market in a bear market. Being down 20% is the threshold and the fact that this index led us up and is now leading us down below the 20% mark should wake you up to the fact that this market is junk and should be avoided at all cost.
