Another Boring Day Ends With Stocks Pulling Back On Lower Volume; God Help Us All If Tomorrow Is As Slow
March 28, 2008
I had a lot of errands that I had to run tonight and the funny thing is that the most important one still is unfinished. And you know what, sometimes that is just the way it goes. I could have been upset that I did not get it done but instead I decided I would cash in my chips and wait for another day.
That right there is exactly how I see the stock market right now. This is a market that looked like it was going to deliver us something good and instead it ended up having a closed sign on it and now we can not get what we want. Many traders want to enter this store and take the merchandise out of it and play with it but the market is closed to CANSLIM investors and there is still nothing I really want in the store anyways.
If that did not make any sense, because I am too tired maybe this will. Tomorrow I am going to go driving around this island for surf. The chances are that nothing is going to be out there. But I am still going to bring a shortboard and longboard and PRAY that something exist out there. If I drive around and there is nothing out there, do you think I am going to paddle out into a lake of flatness? Or let’s say it doesn’t even hit my knees, do I then take my shortboard out? OF COURSE NOT. When there is nothing, there is nothing. Trying to surf waves that are NOT there is stupid and kooky. You want to look like a freaking schmuck? Paddle out into Waikiki waves with your shortboard. Let me know how the “vibe” is.
Now using surfing as the reference, let’s apply the stock market to surfing. OK, so we got our follow-through day. That to me is the equivalent to seeing a big pounding storm form up near Alaska with some amazing swell readings hitting the buoy. So I wait till sunrise and when I wake up I go outside and instead I don’t see pounding surf; instead I see some ankle-biters. But the forecast was for a giant swell? So what do I do? Do I paddle out with my gun and wait for the “set of the day” to come in while everyone is inside picking off the shore breaks? Or do I accept that it is what it is, the forecast was wrong, and go back in and grab my 11-footer? I go back in and grab the damn boat!
This is the market right now. We got the storm and the swell was produced but dang it somehow the swell has not shown up. If the swell was going off we would have breakouts left and right with longs just flying higher making incredible gains. A few longs I just went long that are doing nothing should already be up 5-10%!! The fact that they are not, so many leaders are failing again, and soo few are even breaking out tells me that this is just what we call an “edge pass” and that NOTHING hit us. Instead the swell completely missed us and nothing came about. If this market reverses and we fail, it will be the equivalent of the swell missing us. No big deal, cut your loss, trade quickly, keep your cash high, get wet, and paddle back in.
Eventually one of these storms is going to send a fetch so big that you make a house in your pants before paddling out. That will be when we get not only a follow-through day on the DJIA but a follow-through day on the NYSE, SP, SMLX, MIDX, Nassy, and the IBD indexes on huge volume. After that we will get CANSLIM quality stocks (of the quality of the longs I have posted the past two columns at Realmoney.com) breaking out on huge volume with green to max green BOP, left-and-right. There should be so many great charts to choose from that we have NO PROBLEM loading up. The same way as if we had huge surf you wouldn’t have a problem picking off whatever wave you want. When the surf is big enough, the best take whatever they want as the crowd (which is me by the way 
) sits on shore and can only dream of getting double-overhead barreled followed by a cut-back, finished off with a floater. Yes, a true bull market.
I hope this makes a little sense and if it doesn’t maybe I will have to relate it to poker so that the other half of you that do not understand sports but understand odds can figure it out. But after sports, girls, and poker, there is nothing else I can relate the stock market to as the market, poker, sports, and girls summed up my years growing up. Well I could add one other subject but that was from SO LONG ago that it is irrelevant; and as for girls, I am basically married so that is up. Poker has been pushed to the backburner, also, since this became a paid service January 1, 2007 at Investors Paradise. So really all I know about is stocks. So when I say I am almost 70% cash and at the highest levels since early 2002 (SIX YEARS!!!), I hope, with all my heart, that everyone is listening to me.
We are very overbought, so a pullback has to be expected and it appears we are starting one. As long as volume stays low a chance of more upside on higher volume rises. If volume picks up and we continue to selloff on higher volume, you can kiss the lows goodbye. However, we have a put/call that hit 1.13 today and unless a selloff makes people more cocky it appears the crowd is making bets on the market falling.
Still, with 41 new 52-week highs to 74 new 52-week lows, you can’t say that the rally has been powerful AT ALL. Not only that, the Acc/Dis rating on the IBD 85-85 (which are our leading stocks) is a lagging D. The only index with a B is the Nasdaq. Take that with the DJIA having a 62.7 p/e and homebuilders our leader of this rally (it is not good when a laggard leads a rally) where they have gone from #197 to #3 the past six months based on price performance.
Beside the laggard homebuilders, the household, metal products, tobacco, commercial services, food-meat products, and energy stocks simply DO NOT excite me. Technology and HUGE growth in innovative stocks amongst a broad range of sectors make the best markets. All market can be traded but very few can be used to make a FORTUNE IN. This is not one of those markets. We have not seen one of those markets since March 2003 to January 2004. Which is really sad because the 1990s were FULL of them.
But that is the way it is. Take it or leave it, with the stock market. And I guarantee you if you do leave it, you will NOT be here at the exact moment when the best looking stocks breakout and go on to produce huge gains. Those that got tired of the 2000-2002 bear missed the entire move of 2003 and the later move in 2004. In fact only after the uptrend got hard did they return in 2007. Like always, the crowd shows up at the end.
On that lovely note, I hope you all have a great Friday and I hope I can get my errand finished tomorrow as I drive all over the island wondering if I should poke a few longs and pray that they are the 1 of 4 that move higher; or if I should just keep my boards on top of my truck and keep them high and dry and wait for a better swell, even though it could be a month away. I think when it comes down to it, the best wait. Only the donkeys, kooks, and newbies paddle out. Thankfully, after a little bit of time in the water I feel like I am none of those. Even though deep down I know I will always be all of those.
Aloha and I will see you in the chat room!!
Comments
2 Comments »
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Good Luck to all.
Tom,
By far the best comment we have had here.
Josh has a unique style and insight on the markets. I am happy that he and the rest of the BWT crew have helped you! Excellent stuff.
Aloha and many thanks!