Before Tuesday’s Opening Bell
July 22, 2008 | Leave a Comment
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No matter how much noise I hear out there on the bubblevision I refuse to fall for their trap and get emotionally involved in a market that is so different from one day to the next. The semi-good news is that the general indexes are all in clear downtrends and if stocks can start failing left and right, I will not be shy about getting short.
However, I do realize that we have been going lower for a long time and I would prefer to focus on getting long as quickly as I possibly can. However, medical stocks being the ONLY leading sector does not make me confident that we have seen the lows and it is straight up from here. It would be real nice to see more than a ONE WEEK rally attempt by the financials and the automobile stocks also.
For now, seriously, take it easy and protect that capital. The easy money is waiting to be made and the time is not now. One more time, be careful out there. I am about to pass out.
Good night.
Before Monday Morning
July 20, 2008 | 5 Comments
Before you go out there with any new market or limit orders, I want to remind everyone that the best bottoms are NOT created from a heavy volume selloff that is immediately met with a higher volume, railroad track building, trading range. All of the indexes show signficant cautious and bearish outlooks with everything trending lower, below the 50 and 200 DMA’s, and with oil, metals, mining, and gold possibly topping (I think they are) there is only one group leading us higher now. And whenever you only see this group lead, you can be sure the market has some struggling left to do: medical stocks.
Unless you have any new buy orders for anything other than medical, I must recommend that you keep your portfolio in 70% cash or higher. IBD suggest 100% right now, so does ‘the perfect speculator’s scans’ from Brad Koteshwar from his two brilliant market books. The best traders of all-time, right now, would not be looking to get long stocks here. Like I keep telling subscribers, study the chart patterns of my past big winners, especially 1999 and 2003 which were extremely strong bull markets. Until we see THOSE EXACT SAME PATTERNS SHOW UP, calling a bear market bottom is as foolish as it is calling for an oil top right here after eight years of non-stop gains.
Big Cap Technology Stocks Hold Back Stock Gains
July 19, 2008 | Leave a Comment
After the bell Thursday MSFT and GOOG missed expectations sending both stocks lower after hours. Come Friday little had changed as these two gigantic technology stocks weighed heavily on the NASDAQ. AAPL joined the fun and ended lower on slightly higher volume. Options expiry failed to inspire volume to rise, it certainly gave the impression traders were simply not around for the trading session. Stocks finished off their lows on lower trade and was a quiet day overall for the entire market.
At Big Wave Trading, we feel this market is not our new bull market. With that said, we are finding some stocks that are setting up nicely and starting to present opportunities to make money. In the grand scheme of things we aren’t in an environment where we are going to grab our 1000%+ winners. Therefore, we are keeping our cash levels high and, new trades small, taking profits quickly, and (THE MOST IMPORTANT THING) cutting our losses (keeping them small).
We continue to see market pundits believe we have bottomed in financials. However, this was stated back in September ‘07, Jan. ‘08, March ‘08, and again now. When will we bottom? Here at Big Wave Trading we only care when we know our new bull market is here. At the moment the VIX, VXN, NH to NL ratio, and lack of a follow through day tell us we are not there yet. The real big tell is that we are not seeing as many stocks come through our market scan as we would normally see in a bull market. Stocks simply aren’t ready to make a giant leap forward. Until they do, we’ll be cash heavy read to pounce on the new opportunities.
Gamblers Need Not Apply
July 19, 2008 | Leave a Comment
I am in the belief that we have not seen our ultimate lows in the market. We have not seen the type of capitulation selling you typically see at the market’s lows. VIX and VXN continue to show the lack of fear in the market to show a real turn in market direction. If you are a gambler, step away from the market. This market is one for the birds and will present little (slim odds) upside potential. Gamblers will look to place abnormal risky bets using far too much capital placing them at risk to be wiped out. When the market is presenting such small odds for winning trades it is best you step aside and let it self work out.
The worse trait to have as a trader/investor is the gambler mentality. All the greatest speculators in the world knew how to cut their losses and avoid trendless/bear markets. Our current bear market is one that should be avoided all together. IBD research has shown that Monster Stock gains arrive when we are at the beginning of a new bull market. Why not use this research to our advantage and get a large cash position. We can still find some stocks that are setting up nicely in a bear market but our odds are not as great as if it were a bull. The key is to take profits a bit more quickly in bear markets and make sure you keep your losses small! Not only will you see gains in your trading but you’ll be well capitalized for the next Bull Market!
Financials Lead Stocks During Choppy Intraday Action, Crude Breaks Support to help Boost Stocks
July 18, 2008 | 2 Comments
Stocks were on a wild ride during Thursday’s action. Stocks had a terrible time gaining traction throughout much of the day. It wasn’t until Crude Oil prices collapsed under its own weight, falling below a key support area of $130 a barrel. This helped stocks rocket to session highs as volumed surged with the move. Volume was tracking higher from the opening gate showing that the buying has been picking up. However, our beaten up Financials has led this move off the bottom, as I have mentioned in yesterday’s piece is not the group you want leading you out of a bottom.As I was told many times when I was a young lad: “its not the situation you are presented with in which you are judged its what you do with it that will be.” At the moment, with Financials leading this market is tough to get excited knowing when beaten up sectors lead the market it usually spells disaster for the rally attempt. Cash, by far continues to be king. Preservation of capital is an important, is the most important thing we must execute during bear markets. We need the ability to put cash to work in hot charts in a new bull market, without cash we will miss stocks that race 1000% or higher.
I am sure we’ll continue to see market pundits call the “bottom” here and let everyone know that it is “ok” to buy financials. We heard the same story back in March after the Bear Stearns debacle. How did that call back in March turn out? In fact, its no different this time than last. It will take some time, if not years to repair the damage the “unethical” lending/borrowing practices that were executed by brokers and individuals. Patience is the key in this type of a market and without it we’ll lose our precious capital.
Markets Race Higher led by Financials and Airlines
July 16, 2008 | 4 Comments
Wells Fargo gave a boost to the stock market with positive news stemming from its earnings release. Stocks continued to build upon gains throughout the day. Crude Oil prices sank for the second day in a row, capping a 10% decline in two days to help stocks push higher. Although price action was very positive volume was not. Volume tracked lower all day long and finally closed lower on the day. Day 2 of the most recent rally attempt was lead by financials and airlines. The two most beaten up sectors were today’s leaders, not exactly the leaders you want. We’ll have to wait and see how this rally attempt progresses, but at this point we need confirmation.Over the past few weeks you have read Joshua explain the need to get into cash and exhibit patience with this market. Many will try and bottom feed this market and lose their shirt. New Bull Market do not begin with the old leaders rallying and leading a rebound. Real fresh Bull Market depend on NEW leaders not old beaten up prior leaders. Financials and airlines have been beaten down to the point of bankruptcy. What we need are fresh new companies with new products and services that will spark the large amounts of cash on the sidelines to flood the market. At this point, we have beaten up, old leaders trying to make a comeback.
I am not about to get too excited over this attempt at a rally, I need to see more positive action from the markets.
I Never Panick Into Selloffs And This One Will Be No Different; Cash Is King
July 15, 2008 | Leave a Comment
Sometimes I wonder why so many of the new investors watch the market intraday with all the scare tactics out there that the media regurgitates daily to us all in an effort to generate fear or overconfidence and to make you watch and trade.
There are times when to get REALLY INVESTED and there are times to do nothing. For 90% of you (unless you are picking my longs and shorts BEFORE I do) doing nothing is the only right thing right now. I simply see too many people actively investing that should be completely on the sidelines. And if you are on the sidelines STOP THE PREDICTING!! Just wait for really nice charts to set up and breakout.
I think sometimes the best advice is no advice and right now I wish a LOT OF YOU would stop going to these financial websites for “advice” when all these writers are spouting out random analysis that is shameful and when I read it makes me confident I will continue to outperform the masses. It may cost a lot of money for a Harvard Education but I am not sure how much that is worth in the stock market.
Stop Trading, Seriously!
July 15, 2008 | Leave a Comment
This market is a difficult one to navigate. If you are new to trading, STOP. Professionals are finding this market one of the most difficult markets they have EVER seen! Stop trying to be a hero by picking bottoms and start preserving your capital. The all time greats would be on vacation or at the very least 75% cash. Gil Morales, William O’Neil’s long time apprentice is most certainly not playing with even half his chips. We have not seen our ultimate lows, we’ll continue lower and with the greats on the sidelines why aren’t you?
There are some short term trades to be had here in this market. We can, using history and our charts pick some winners in a down market. If you study Joshua’s past big winners you’ll notice that we can grab some hefty gains during a bear market. However, to get these gains you have to become a subscriber of Big Wave Trading.
Do your homework, reread all our recommend books!
Gold Stocks, Medical Stocks, Food Stocks Are Showing The Strongest Current Patterns In This Downtrend; Some Fear Is Getting Whipped Up In Some People I Know. Is At Least An OverSold Rally In The Cards?
July 14, 2008 | 1 Comment
The people that beat the market year-in-and-year out, unlike the foolish “talking commentators” on CNBC say, are the investors that buy the best stocks in the the best sectors in the strongest markets. At the same time, the greatest of those traders learn how to sell short stocks when the market is in a downtrend like it currently has been since the November highs.
While it has not been the most steady downtrend it did have its moment from November to January where our personal shorts did very well, including one member who was 15 for 16 for this short one day one week and the next week 20 for 21. I sadly did not “load up” on my best shorts that fell 30% to 50% during this time frame. However, I did have enough winners to not go red.
If we are starting another fresh leg in this downtrend, the new shorts (around 25 positions now) are going to do very well because the stocks I have gone short are showing some very extremely heavy distribution on their weekly charts compared to the volume on the uptrend that in some stocks lasted from the year 2001 to now. The way these stocks are rolling over and selling off on extremely heavy volume could lead to some massive potential gains. The question is if the stock market will selloff in a strong trend like the November to January period. If this is the case, I will be excited for my short positions as they should do very well. Hopefully we will get some CBEY, SIGM, SHOO, GRMN, LFC, COH, SGMS, and TSRA moves just like we did during our November to January selloff. We were short all of those stocks and I think if you study those patterns, you can see quite a few stocks setting up, NOW, in nearly the same exact patterns.
Thoughts on VIX and VXN
July 14, 2008 | Leave a Comment
I just wrote my daily commentary over at my blog and included a blurb about the VIX and VXN. Here it is:
“VIX and VXN continue to be “low.” I had the opportunity to speak with an individual who had graciously share that some large institution was handling a large quantity of employee options. There is a debate if the VIX/VXN have sufficiently signal a bottom. Afterall, both have moved almost 100% off their May lows wouldn’t that show enough fear? One explanation that was given to me was the large, LARGE amount of employee options that had hit the market forcing this large institution to sell volitility (vol). What this creates, a low VIX and VXN. Therefore, if this large institution was selling vol than VIX and VXN have moved sufficiently because the indexes are “artificially” low. But, in my experience if a financial instrument are “artificially” low or high they tend to OVER correct on the other side. In this case, VIX and VXN aren’t sufficiently pricing in fear and will overshoot at some point. The bottom line, we haven’t seen our ultimate lows leading up to a new bull market and we should continue to wait patiently on the sidelines.”
I think it is important here to note that when anything is held down artificially it will over correct to the other side.
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