A Zig-Zag Day Ends With A Big Yawn As Late-Day Weakness Sends All Indexes Lower

April 15, 2008

Well, in all honesty trying to draw conclusions from a day like today is quite useless. In fact, anyone that spent any amount of time today trying to delve into the data to find something useful just spent a whole day wasting time. Today was simply a low volume pullback and nothing-more and nothing-less. I believe, without even looking, that this was the dullest day of trading for 2008.

By the end nothing exciting happened except all the indexes were mildly lower. Too bad that was not the case for my biggest holdings. Shockingly, the past few days, the few charts that are starting to look “near-perfect” (meaning they still have time and the technicals still need work) are all acting the worst. On Friday my biggest holding was my worst holding prompting me to sell 25% and then today two of the five stocks that reside in my IRA now need to be cut. This is simply something I have never! experienced in twelve years. You can clearly see, by going over my ‘past big winners’ on the .com site that from 2000 to the 2002 lows I still about ten stocks make significant gains from beautiful chart patterns. Those same exact patterns are NO WHERE to be found right now and when they do start to form they seem to be targeted immediately.

This has prompted one emailer to wonder if the style has been “figured” out. LOL. To that I say it is simply IMPOSSIBLE. Do you know how many stocks are out there? Do you know how many different ways and reasons people have to trade? Do you know how many people REFUSE to buy stocks breaking out to new highs? Do you know how many people do not know how to buy new highs correctly (ie, they buy too late or too extended or after a heavy volume pullback)? Do you know how many people do NOT use telecharts thus making BOP completely irrelevant? Do you know how many people can not tell you what a cup with handle is that LIVE on the trading floor (I know, I once went around taking a quiz and I also asked could it come from a downtrend and uptrend. So many said no the first question and if they did say yes they then said it did not matter where it formed)? The fact is that this system is out of style, FOR NOW, but it will not be long before it comes back.

How do I know? Because we faced this EXACT same thing since the uptrend from October 2005 ended in April to May of 2006. The rally that started that August came on low volume and CANSLIM stocks SUCKED it up (minus HRZ, AFSI, TESO during that time) but after a pullback in July to August, all of a sudden leading stocks took the lead again and transportation-shipping stocks and metal ore stocks took the lead, with MTL and DRYS being my best two during the period for CANSLIM longs. APPY also appeared as a “perfect” setup that worked. But during that time so many “perfect” setups failed that it was obvious the bear market was around the corner.

And as far as I am concerned we are still in one and that is why the methodology with the pretty charts are not working. They will shortly, but, for now, no way. This market is too unforgiving. To see what I am talking about take a look at SVR and GEF/GEF-b today. Stunning if you ask me. To see the kind of steady accumulation in the stock yet watch them slice right through the 50 DMA without stopping is just sickening. I NEVER! expected that Especially after the recent accumulation and green to max green BOP. Thank God, I realize it is NOT me and it is the market and I know to stop.

So that is what I am doing. The stock on Friday that I am most long should NEVER have acted like that, SVR and GEF should NEVER have violated that 50 DMA (just like DAR, CLR, FFH–they have ALL SHOOK ME OUT!!!!). This tells me that the support areas are being targeted. Obvious support will no longer be respected by the market as I guess it is just too damn obvious. This is sort of depressing but I know that if the market was right it would not act like this.

Thank God I decided to post all my past big winners. By just reviewing them it becomes clear that when things are right the best stocks will simply never pullback and knock you out of the majority of your holdings. SVR is a clear example. I am stunned by that price action. You can almost guarantee that with the low volume shake that it WILL be higher the next few days and probably on its way to new highs shortly. The problem is is that I am disciplined. When a cut loss area is violated it is violated. I can not go back and try to justify the situation. If I did that and SVR falls 10% tomorrow, I am going to be SICK to my stomach. So I would rather cut my loss, watch it go back higher and breakout and go on to produce a 200% gain than get hit with a huge loss in a bad market. I can ALWAYS!!!!! find more BIG MONSTER STOCKS but I can not bring myself back off the mat from a big loss probably at the current time that I could during other times in my life. A rough personal life, along with living with a disease, does not make for a very happy time when you combine that with a BIG LOSS. Chances are a state of depression would occur.

But, instead, I just say F it. I pray to God that things will get better, because history has proven to us that it always does as bull markets dominate long-term trends. The only way to make big money is to make sure you NEVER lose a lot of money. That is why you must always cut your loss even when the stock breaks the level on low volume. You simply can’t risk putting more pain on your account. Because you know another USNA/HIL/TRAD/TASR/FMDAY/IST of 2002-2004 will be coming along shortly. There still is one stock setting up like it could be but the BOP is starting to weaken which is NEVER good to see when the price is moving higher to sideways.

Some interesting things that caught my eye, before I get out of here, include that the yield curve is still looking very bullish and if companies had any money to invest things would be very good as the yield increasingly returns higher yields as you move into the future.

The NYSE short interest ratio is at 10.61 which is an all-time high as it now almost takes 11 days to cover all the shorts based on average daily volume out there on the NYSE. This means that despite my warnings to never short a dull market, a lot of people think that is exactly what they should be doing as I guess a lot of people are for sure a recession is right around the corner as the war in Iraq is impossible to win (do the dummycrats really believe that??? they surely can’t!) and Bush has ruined the USA forever. Well you can sell the USA short all you want but I will take the other end of your trade. Especially when there is absolutely no volume to the selling. But without volume to the upside, buying is not smart either. Doing nothing is the right trade.

A lot of people are very bullish and a lot of people are VERY bearish right here. Well I am just up in the air because I see the Nassy has an ACC/DIS rating of A- on no volume yet the IBD 100 has a C+. This is your visual proof that leading stocks are lagging and a market where leading stocks are lagging is not a market I want to be long.

Now, if those solar stocks (you know the names) continue to setup, breakout, or bounce off key support areas, I want to get very long as this is the HUGE growth industry with a TON of government FREE money (not free; mine!) should help some of those hot charts out there continue to base out and breakout. JASO, FSLR, CSIQ, WFR, SLH, ASTI, SPWR, SOLF, TSL, LDK, ESLR, AKNS are all on my watchlist and if you like HUGE GROWTH STOCKS, I recommend you do too.

Other industry group leading stocks I have been tracking but realizing are full of charts that still need a LOT of work are building-residential/commercial which has moved from #197 to #8 the past six months based on price performance. Transportation-railroad and transportation-trucking have also been on fire with those groups moving from #107 to #11 and #180 to #13 respectively. That is some HUGE growth but stocks like AIRM and FAST are still a month away as more sideways (right side of the base) work needs to be done.

Also not sure why everyone is so bullish when there were only 65 new 52-week highs compared to a heavy 227 new 52-week lows. It should be clear to everyone, know matter if you live on the island of Manhattan or the island of Tonga, that leadership is with the sellers as new highs and new lows are the most extreme levels of power in the market that there is. The fact new lows have been leading before the selloff started–so we will need to see the market selloff while the new highs beat the new lows before we can think of getting extremely bullish.

For now I am cautious, ready, and able to get to work on the long or short side depending on which way the market wants to break. Be very careful out there, cash is STILL king, unless you are a daytrader then you can do whatever you do. Please, do not press your bets. I know what HOT charts combined with strong to powerful fundamentals can produce. I also know what the charts that lack these traits produce: nothing. My cash is waiting for more of my ‘past big winners‘ setups before I go all-in.

Aloha and I will see you in the chat room where EVERYTHING IS BACK TO NORMAL. YIPEEEE!!!!!

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