A Semi-Volatile Dull Intraday Range Ends With Stock Indexes Higher On Lower Volume

January 26, 2009

The market sure has been doing its best nothing lately as the indexes all closed slightly higher today on lower volume. That puts the market around where it was five days ago. That means that in the short-term the market is going nowhere fast. This has been the M.O. for the market for the past three months actually and until it changes I believe it is safe to assume more continued boring market action.

What will change this is volume and a break out of this range. Right now, I have both shorts and longs working for me. Since having five longs, I now have eight and they are all doing well, so far. The same goes for shorts as last week I took eight shorts with seven of them so far working and one just having to be covered completely today. This means that my picks are working on both sides to a small degree and since neither side is producing large gains it makes it hard to tell where the market might want to go next.

The best we can do is look at the market from where it has come from to get a sense of where it might be going. Since last year, the market has been in a long-term and intermediate term downtrend. However, in the past three months (sub-intermediate) the trend has been flat basically from 10/27 to 1/26 with the NYSE moving up .9% during that time. The same goes for the short-term the past week as markets are up and down anywhere between .5% and 1%.

What I am waiting for to actually start making large moves in the market is for a real breakdown or breakout on strong volume. If the indexes can start moving higher or lower on large volume then I will clearly know which way to lean. But right now, we have mixed signals.

While we started to lose longs and gain shorts the market appeared ready to breakdown last week on Wednesday. However, since that time, those shorts have held, and my longs have increased and worked. This hints to me that overall the market is bearish and wants to go lower but first would like to rally to relieve the oversold pressure that still exist in this market on the short-term.

If the market was ready to turn higher on huge volume, I think I would have had more than a few full cover signals than what I have had. Also an important thing to remember is that 2 of those 3 full covers are back to being CLEAR shorts. So by taking the full cover signal for what it is I still got myself out of what turned out to be weaker stocks than what I thought. So if the market was going to run higher, I am sure those covers would still be moving higher, my longs would be up more than a few percentage points, and my new shorts would have to be fully covered.

At the same time the market doesn’t seem like it wants to breakdown on the short-term because last Wednesday and this Tuesday were BOTH perfect opportunities for the market to bust wide open as ugly chart patterns rule the chart world. However, both breaks were immediately followed by short-term support. This explains why I did not go from 11 longs to 1 long and still had 5 longs now up to 8 longs. The fact that the amount of longs continue to grow indicate to me the market doesn’t want to breakdown either.

So what to do? Easy! I say continue to hold the shorts that are working that have not given ANY kind of a “full cover signal” (subscribers you know what those are). As long as those stocks are trending down, failing at the 50 or 200 day moving averages, and can’t get a rally going on low volume, try to hold them for a 99.99% gain. However, if you get a powerful move higher on huge volume that tells you to get out, you get out!

While we hold those shorts that tell us to hold on, we take the longs that look like they want to breakout and go higher in a possible oversold rally. We will go long those stocks and hold them until we hit clear sell signals or the 25%, 50%, or 100% marks on the way up (I doubt we will get any 2000% returns in 9 months in this market). Hopefully our new longs will rally till the market hits that 200 day moving average on the indexes. Then we can take our profits there, and get ready to reshort some of our best shorts or go short the fresh breakdowns like AFAM or LHCG. I don’t worry about giving out these stocks because FIRST you have to actually know how to short at the right time to make the big money. I think it is safe to say most people don’t know how to short correctly and make the big money. So I am fine.

Anyways, I’ll hold my shorts and if they rally on low volume and fail at the 200 day moving average of the indexes, I will have no problem taking some new shorts. During this rally, if it happens, I will hold my eight longs and GLADLY get more long anything that says “Joshua, get long me!” And what if the low volume rally doesn’t happen? Great! My shorts will just keep making me money and I will quickly cut my losses on my longs.

What if the rally ends up being on low volume and then the market breaksout on strong volume over the 200 day moving average? Well then I will take the rest of my profits in shorts and obviously go long the leading stocks in the leading sectors that are moving the most in the rally.

No matter what happens, I AM ON TOP OF IT and ready to make money from it. Long-term I also suggest some of you (if not all of you) start thinking about diversifying some of your retirement money away from the US Dollar. I have usually held all cash in my IRA during bear markets while LOADING UP ON THE BEST stocks like EPIC 03, TASR 03, IST 04, LMLP 99, CMRC 99, CRUS 00, GNSS 01, USNA 02, HIL 03, ERS 05, AAPL 04, HRZ 06, AFSI 07, and the rest of my beautiful ‘Past Big Winners’ whenever they would show up. However, in 2008, after the DGLY, PDO, and ACM trades, the account has not had a single move made in it.

So I have been forever used to LOADING UP on the BEST chart and fundamental setups out there that I usually/used to see at least once a year. But now it feels a little like it might be FOREVER until I see the quality longs like I saw from 1996-1999 and 2003-2007. If this is a long-term bear market and our Dollar is going to get crushed by this INSANE economic policy the Fed has driven us into then I want to be protected. Therefore, I will confess that I have made a move that I am going to continue to make till the day I die.

From now on I am only going to “LOAD-UP” my IRA on the BEST STOCKS in uptrends with 80% of my available funds. The other 20% will go to Gold, from now on. I never thought ONCE from 1996-2007 that I would have to do this but after heavy research spanning months on this subject I have decided an “insurance policy” is a MUST in this stock market. So every year, when I max out my IRA with my personal contributions, I will put 80% in cash on the side waiting for those perfect stocks like TASR that moved up 2,390% in nine months or EGHT that moved up 295% in a little under one month. The other 20% will go in Gold. This will be my M.O. in my IRA till I die. My IRA is six figures and if I can’t make a ton of money with 80% of my funds in the market with 20% in Gold, then I have no business even investing in the market.

It is almost IMPOSSIBLE for me to believe that we will not have another strong bull market (1995, 1998, and 2003 was strong; 1999 was EUPHORIC and will never happen again). So if another 95, 98, or 03 market can come at least 2-4x a decade, I will be extremely wealthy when I retire. Sadly, if we don’t ever have another bull market like the 20% to 30% annual rallies then our hopes for finding HUGE WINNING stocks will go down significantly. Study the bull market years of the 1980s and 1990s. All we need is one or two a decade and we can end a 10 year period CRUSHING EVERYONE EVEN WITH 20% OF YOUR IRA MONEY IN GOLD. Remember, this is an IRA move only. I will only own Gold in my stock accounts if stocks like BVN, AUY, NEM, GOLD, GG, IAG, ABX, KGC, ANV, or any other Gold stock setup in a proper base on low volume, after at least a 20% rally, and then can breakout on very strong volume with green or max green BOP. If this happens, I will be very happy to go long any Gold stock that sets up in a proper base.

However, for the sake of this market, let’s hope we can get more than the education, speculative stem-cell, and metal stocks moving. Be careful out there everyone, remember cash is KING! and a fair warning to everyone…if tomorrow’s session is as dull as today’s especially if it has lower volume, I am only going to post a video as I have been really tight for time and would like to open up a few more minutes to hours while I work on the dreaded tax season. Great fun! (NOT!)

I wish all of you the best. Go out there and take wall street by the horns and the “you know what.” It’s time we take back the money wall street stole from you (they didn’t steal from me as I made a little money last year)!! And yes they did steal it! Wall street you should be ashamed of yourself!! My allegiance is to you the readers and NEVER to crooks on Wall and Broad.