A Very Nice Oversold Bounce Has Bottom Callers Screaming “It’s Here” Again As IBD Calls The Market Now In A Confirmed Rally; How Nice Can A Rally Be With ZERO New 52-Week Highs On The Nasdaq And NYSE

October 28, 2008

I know most of you that are clueless to what I am short and long have no clue how well I did today but I went long a stock a few days ago…it was up 14% today. How did the crap you bottom-fishers caught do? Probably not as well. I am 95% cash, 2% short, and 3% long with 2% in the one stock up 14%. So before you go nuts and think that I lost money today, get your facts straight.

I’ll try to remind everyone that has believed in every other bottom THAT HAS FAILED that the biggest UP days come in BEAR MARKETS. Let’s see how many of you can remember this for more than 1 hour. LOL.

Obviously, I am not talking to my subscribers. All of you are very smart, you know what I am long, you know I have taken most of my shorts off for BIG profits, and you know that I have been preaching CASH IS KING for a week now as the market has gotten very volatile. Those of you not subscribers, I fear for your accounts in this market. Great luck!!

There is one major point that I will go into with my subscribers that I did not realize until JUST NOW. The DJIA and SP 500, ON AN INTRADAY BASIS, did not make new lows and thus “technically” re-followed-through on the indexes. This is why IBD calls it a a follow-through day. I still see a very weak market underneath with no 52-week highs but my biggest long (that some idiot said wasn’t a good long–boy you sure were wrong like EVERYBODY else that seems to challenge me) was up 14% and that combined with a high volume strong move in the IBD 100 does indicate this rally has a chance of helping set the stage up for a better rally int he future. For right now I still see UGLY stocks everywhere and have a tough time calling this a bullish market. It is a fact that the biggest most volatile up days occur in bear markets. So this huge up day has all the hints of being a bear market rally.

But we will see. Remember, unless we see more max-green BOP filled charts, with huge accumulation, and excellent price pattern there are very little chances that a market rally will last. I have seen some. But some is not a ton. I will expand on this after I get back from going to the airport. I will touch on this subject pretty hard so that everyone has a lot to read tomorrow in case I decide to skip on the intraday action as I find volatile markets nerve-racking.

Since I am back and not sleepy yet and there is time before the opening bell I want to make sure everyone is completely clear about where I stand about the market and positions. I am long 5 stocks that are very strong and am short 24 stocks that are very weak. In August, I was about 20% short. Now, I only have about 2% of my account short. Why? Because I had gifts handed to me on MOST of my short positions as many of them fell hard fast and gave clear profit taking signals. Some didn’t but almost everyone did so taking 30% to 77% profits across the board on all my shorts was very easy. Do not forget that from November to January I also made good money on shorts that produced 20% to 60% gains. So I have made a lot of money on individual stocks by being short this year. Since the top in October the market is down around 40%. I have no clue why so many of you, that do not subscribe, want to look super smart and be the one who “buys the exact bottom.”

But if you are playing that game, that means you would have to have guessed that March, July, September, earlier in October, and now is “the bottom.” Even if you are right this time, you were wrong the other 3 to 4 times and that cost you a TON of money as stocks went down a LOT faster and further than stocks went up. Even now, with the market extremely oversold and many wanting to be “very long and strong boyeee” the market is still in a very dangerous downtrend with very few good looking LEADING stock charts out there.

Now, obviously, I know how to find winning stocks because I only buy leading stocks with most of them hitting new highs. I would NEVER consider buying a stock UNDER the 50 day moving average or a stock that was previously up over 100% and is now down over 50%. I stick with fresh new leaders. That has led to a recent long that was up another 14%!! today. This stock was considered “a horrible long” by a very uneducated fool WHO IS A SUBSCRIBER because it did not move up immediately.

I want to help idiots like this guy and let you know that I give you CLEAR CUT LOSS areas on EVERY LONG or SHORT that I take. There is not one position that I will ever take that does not have a FINAL cut loss area that I always 100% adhere to. So after going long this stock, this guy was unhappy because right after the stock immediately went higher by 3%+, it ended up having a down day of 11%. This donkey did not read my analysis WHERE I MADE IT CLEAR that this was a dangerous stock for NEWBIES or IDIOTS because it is a volatile issue that could pull back around 10-15% to the 50 day moving average before moving higher.

The reason I go long on the breakout is because 25-33% of the time the stock blast off and never pullsback to a perfect buy point. If this idiot would not have opened his dumb mouth and freaked out on the down 11% day he would have realized that the stock had a bullish intraday tail clearly alerting SMART investors that the stock found strong support right at the 50 day moving average. This was clear to anyone with a brain. The stock held green BOP, not losing it to yellow or red, and volume was very large as it found support at the 50 DMA. This donkey probably freaked out on the pullback and sold exactly where the stock found support. Since he was a newbie and took unnecessary risk he deserved to take a loss in this stock.

If this guy would have noticed the AMAZING fundamentals and history of support in this stock, he would not have made his ignorant remark on 10/23. Instead he let around 500 people know he was an idiot. For investors that had a brain, they noticed the excellent support and it more-than-likely confirmed their belief in the stock (like it did for me) that it had a great chance of continuing higher, if the stock market cooperated. The market did and today the stock capped off part of a 15% gain since the pullback right to the 50 DMA. If you have not learned yet that the big money is made BY HOLDING STOCKS DURING THE ENTIRE UPTREND, or DOWNTREND IF YOU ARE SHORT, you need to take some time off during this volatile market to learn how Livermore, Loeb, Baruch, Darvas, Wyckoff, Dreyfus, O’Neil, Heebner, Lynch, Weinstein, and all the other greatest traders of all time made their big money in the stock market. You will find out they did not daytrade and they did not freak out and sell if they had to cut their loss. They were smart enough to realize that NOBODY is 100% right and instead of believing that they could get EVERY stock right they had discipline to cut their losses fast on stocks that fail.

This tool who will surely go broke in the stock market was upset that I gave a cut loss area. Uhm, hello, dumbass, without a cut loss area you open yourself up to NO PROTECTION and then the stock could drop 20%, 50%, or 70% before your insane and uneducated self decides to cut your HUGE loss. This huge loss will take a HUGE return to make up your losses, and the chances of you getting a 100% return after a 50% loss, just to break even, is slim to none. EVERY SINGLE intelligent investor that made a ton of money in the stock market (have some of you seen my returns in ALL of my ‘Past Big Winners from 1999 to 2008?’) KNEW that they could NOT be perfect and that having a 100% win/loss ratio was impossible. Therefore, they, like me, developed a method that suites them so that they can protect their capital in case what seemed like a great decision turns out to be a bad one.

I hope that some of you that have no idea how hard it is to get MY AMAZING huge returns in the stock market understand that it is just like learning to be a doctor, lawyer, or an athlete. You can’t just spend 10 minutes on this a day and expect to be Alex Rodriquez in 2 weeks. Or work on one court case and consider yourself the next Attorney General of the United States. Also if you NEVER operated on a patient before, I doubt you can handle your first ER experience under immense pressure perfectly your first time making the incision. Sometimes lawyers lose cases, sometimes doctors lose patients, sometimes athletes break their bones, and I know this might shock some of you sometimes I will lose some money in the stock market.

The most important thing is how often do you make those mistakes and if/when you do make those mistakes how much does it cost you compared to when you are doing things right. Just like in poker, if you only play 1 out of 10 hands but take in HUGE pots compared to the small and big blind you lost during the ring game, even with a 10% success record you can come out of the room with a LOT of money. In baseball the best hitters are wrong 7 out of 10 times. If you can be wrong only 7 out of 10 times (which obviously means only being right 30% of the time) you end up making more money than your counterparts.

I think if you just go over my 2005, 2006, 2007, and 2008 PUBLIC records that are available on my blog you will see that during bull markets, when I am going long the best stocks in the best industries with the best chart patterns, I have near a 66% to 75% win/loss ratio. Not only is my win/loss record very high in bull markets, the positive returns compared to the small cut losses that CANSLIM and IBD has instilled in me ensures that my account constantly will grow while my losses stay small. Even in a bear market, when I am right only 25% to 33% of the time, on my longs (on my shorts, since the trend is down, I do very well like my 24 shorts showing gains in all 24 stocks), it still turns out fine because I cut my losses even faster and the few winners (like PDO up 339% in 1 1/2 months and DGLY up 50% in one month in 2008) take care of the small losses.

The bottom line is that the trend is your friend and right now the trend is down on the long-term, intermediate, and sub-intermediate time frame on the NYSE, SP 500, DJIA, Nasdaq, SP 600, Russell 2000, and the IBD 100. Along with that, on the very short term, after the 7% to 11% gains, we have an uptrend on a very short term. For the past month, the trend is VERY VOLATILE and some extreme moves up and down have made it very hard for those that do anything but daytrade. If you daytrade the 2x ETFs like RevShark does or if you have some great high margin and know how to trade the index futures, I say go for it. But if you are like me and stick strictly to investing for the big gains (like all the greatest traders of all-times did; they didn’t daytrade–even though when I move to Texas and get “serious” I probably will with free money not in play) it is definitely not time to get nuts and get 200% fully invested in any random big-cap stock. Instead wait for the NEW and FRESH BIG WINNERS to show up. I currently have five longs that make up more than my 24 shorts (remember I HAVE 95% CASH!!!! so I am waiting to get heavily positioned when a REAL CLEAR trend in the market indexes AND in individual stocks occurs) as I have cashed in most of my shorts for huge gains.

However, there is no way I would get rid of my key short positions that have big gains until I get a full sell signal. That comes in the form of a HUGE volume up day on support or near support of the most recent buying after I have already taken gains well over 45%. The other FINAL cut loss area would be a heavy volume move above the 50 and 200 day moving average or just a low volume move over the 50 or 200 day moving average if I do not have a gain in the short. So even though I still have shorts, they are LIKE I KEEP SAYING OVER AND OVER not of the same big size that they were as we swooned in October. Right now, in this mixed market, some shorts are doing well and some longs are doing well. Those are the stocks I am in. This is not complicated.

If it is full of green to max-green BOP, huge accumulation, and a bullish price pattern, I am long. If it is full of yellow to red to max-red BOP, huge distribution, and a nasty price action where there is a failure and reversal near the 50/200 day moving averages, then I am short. Not many stocks look real pretty but at least I have one that was VERY pretty and is still moving higher with red BOP, I have one stock that is green and a medical stock, and I have one that is very green to max-green with a LOT of accumulation and strong price action. So there is one to three stocks that could do well but if you haven’t been able to tell by my constant videos going back to previous bull markets, there are normally a lot more than a handful of nice stocks. There are normal two to three handfuls of beautiful stocks with another handful of “perfect” stocks that would make any bull happy.

Right now, that leadership just does not exist so I can not get all giddy and happy and positive about a market where I have only 5 longs with only 2 currently being real pretty. There are also only two stocks setting up in nice price, volume, and BOP patterns. So it is hard to get too bullish on what IBD has named a follow-through day (the SP 500 and DJIA held the 10/10 lows. Still IBD has said to be careful about this FTD, just like with all the others. What is the biggest problem? Well if you ask me it all comes down to new highs.

On the Nasdaq, NYSE, and AMEX, there were 0, 0, and 6 stocks respectively that hit new 52-week highs. All six that hit new highs were not only from the AMEX they were all ETFs. So technically, we just had another follow-through day with ZERO stocks making new 52-week highs. There were also 575, 496, and 136 new 52-week lows to confirm that on such a powerful up day where the market is up 7% to 11%, we still have only 6 new highs to 1,207 new lows. That is not bullish.

Remember what the charts looked like in 2002 and especially 2003 as the follow-through day on 3/17/03 sent the market over the 50 and 200 day moving average. If you have watched the recent videos on the Gold forums or have even watched the YouTube video from yesterday you saw that not only were a lot of those stocks “near-perfect” but a lot of them were either hitting new 52-week highs or were coming close. It was so different in 2003 to now, in fact, that if my memory serves me right (I do not have the current data but would love for someone toget it for me) there were more stocks hitting new 52-week highs than stocks hitting 52-week lows in March 2003. In October 2002 it was not positive yet but there were still a lot more stocks hitting new highs on the NYSE and Nasdaq than ZERO!

OK, I have given you enough to chew on during the market session on Wednesday. If you are long any of my stocks that are starting to act well, do not watch them intraday!! Wait till the after-hours are closed AND THEN GO CHECK THE LONGS OUT. If you must watch the market intraday, just watch the index futures, some ETFs, or other stocks that you have do not have positions in. ALOHA!!!!! Life is beyond great and remember CASH IS STILL KING, unless you are a great stockpicker. I guess that is good news for me!! Aloha!!

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