Despite Selloff, Volume Was Lower And My Longs Did Well With One Up 13%; All Stock Indexes End The Week Higher, For The Third Week In-A-Row

March 27, 2009

Stocks ended the week on a sour note with the Nasdaq falling, the SP 500 dropping, the DJIA falling, and the SP 600 lagging with a xxx loss. The good news on Friday’s selloff comes on two fronts. First of all, volume was lower on every exchange which is comfort to those who have turned bullish. Second, leading stocks in leading sectors in the IBD 100 and IBD 85-85 did not lead the market lower. If that would have happened that would have been another negative on top of the fact that leading indexes are not leading this market higher. Instead the Nasdaq, SP 600, and Russell 2000 are leading the way higher. While that is a positive, it is not a positive that the IBD 100 and IBD 85-85 are not up the 25%-or-so that those leading indexes are up from the March lows.

If this is going to change it will need to change soon as every bull market that has lasted any length of time has always shown leading stocks leading the way higher. When you don’t have this, you can be sure that the market is not going to last very long in an uptrend. However, anything is possible, after the market we were treated to in 2008, I guess. But history shows that leading stocks are one of the most important elements a market needs for lasting gains. What is the other element? If you guessed volume, you are correct.

Luckily, last week has finally started the process of setting up a possibility that a lot of fundamentally strong stocks are now ready to match that on the technical side. If stocks like the stocks I profiled on video two, three, and four can complete their setups and breakout, chances are very large that they will lead the market higher. You can view my ‘past big winners’ to view the kind of returns that we get in leading/”hot” stocks that setup in these historically strong patterns. If this market continues to move higher, I would take it that a longer rally could be in store and the stocks setting up that look the best, as long as there is not a lot of heavy distribution or red BOP, are finally hinting that they ready to run.

A lot of investors have gotten so used to buying an initial move and then selling the “rip” that if we can get a sustained rally going I have a feeling that a lot of technicians that have been preaching taking gains around the 25% to 50% area on your full positions. Even though by doing this we could have been saved a lot of loss profits at the same time you would still not be long AIPC or ANCI. If this was a normal market, I am sure they would be up much higher and many more individuals would be angry of not holding them longer.

At the same time a lot of commentators are preaching buy the dip and sell the rip, they have forgotten that there were some really juicy shorts from LEH, BSC, FNM, FRE, to any other bank. If you shorted any of those in 2007 by the end of 2008 you would have gains of 90%+ on margin. Besides those we took full profits on a short named SDA recently that gave us a 78% gain on our final cover. Gains like this sure are nice to have in a market doing poorly. I have heard a lot of traders bragging recently but these same traders and flippers did not have a SINGLE STOCK producing gains of 50% or more over a nice holding period of time. Anyone that got a 25% move in a few days was either extremely LUCKY or finally got one right after failing at many other chances. So be careful of some of these “jerks” out there that have been bragging recently. They may have done well flipping stocks in 2008 but ask them what they returned in 2003 compared to CANSLIM/momentum investors like me that know how to hold SINA, TASR, NTES, and SOHU for the 1,000%+ gains that I was used to getting in past bull markets.

I just know the same thing will happen if this short-term bear market rally turns into anything more. Stocks that I profiled on video two, three, and four on the Gold forums show some stocks that are having those “near perfect” charts that could easily setup in “perfect” patterns that produce the big gains. With the VIX still around the 40 level, I don’t see how another 1,000% to 2,000% winner can’t setup. However, since the market seems to have no staying power, I would assume we should be happy with 300% moves in one to a few months if that is all we can get. EGHT was still fun in late 2003. It wasn’t as fun as a TASR. But it still shows that as long as you are in an uptrend, early enough, you can hang on for a wild fun big wave ride.

I went over a LOT of information in the videos this weekend so if you want to check out what stocks I am looking at for possible future longs you should definitely watch the videos 2-4 posted in the Gold forums. I also go over the entire market on video one that will show you how I am looking at each index right now, for the upcoming week.

I can not lie in saying that the end of the week was a little disappointing but like I said in my video, before Friday, the market was up 9 of the last 13 sessions with many of those up sessions being on very large gains. So a drop in the market was to be expected and the good news is that the drop was not that large. The bad news is that the selling continues after-hours as the futures market is looking for a healthy drop in the AM. There is no use searching for the reason why as our stocks are simply monitored and acted on based on their price, volume, and BOP (on Telechart) performance.

The after-hours drop is being blamed on the force-out firing of Rick Wagoner from GM. While this looks bad, we need to remember that in uptrends after-hours selloffs usually lead to a gap down in the AM where stocks are then supported for a rally the rest of the day. If this does not happen, our whole thesis of getting ready for a strong rally via all the recent longs setting up with tighter price action, heavy accumulation, and green to max green BOP might need to be put on hold. However, with those strong chart patterns, clear accumulation, and with some stocks showing some very bullish EPS/sales growth numbers, I am sure that eventually, if this is not going to be the time to rally, we will get one in the future. I find it hard to believe that all of these strong individual companies that actually have really strong growth and nice charts are going to all die and never come back. Just like in October 2002, for a real rally we might need another pullback and then a real FTD like the one in March 2003.

While I truly doubt this is going to be another 2003, if we do rally, I still have a lot of confidence that these charts can build on a better foundation as long as they continue to grow their fundamentals. There are plenty to go over, if you have not watched the videos yet, so get viewing! Great luck this week, stay positive, keep yourself vigilant and flexible to go long stocks with nice setups and short stocks with weak setups, and remember if you miss a limit on a stock you want to be long there will be another fish in the sea eventually. There is ALWAYS another stock.

Things still are not easy and I did a lot of research this week and I found a couple of people who think it is easy. That is pretty shocking, arrogant, and let’s me know that when the market does take off (hopefully, it does) these guys will not be long for a 200% gain, 500% gain, 1000% gain, or 2000% gain. A lot of great commentators are much better than me at taking quick profits and cutting losses even faster but in a real bull, just like the previous bear where I had multiple 50%+, 60%+, 70%+, and 80%+ winners, they will never be long a TASR, HIL, SIGM, FMDAY, LMLP, MRVC, GNSS, AFSI, HRZ, or any of my other past ‘big winners’ for the amount of time for the amount of gains that you will get here at BigWaveTrading. Everybody that you know, I know. I have subscribed to everyone at one point or another in my career. Later on I am sure I will have more say in the stock market public but for now I like my quiet life outside the life of CNBC. Those loud, loud, loud guys can keep talking the big game with their big money. I’ll be right here relaxing with my charts and gold bars.

While I still believe that even in a market of hyperinflation we can outperform the CPI and market, I still want to make sure that 20%-25% of my assets are in hard metals like silver, gold, and platinum just in case that moment comes when all hell breaks loose. Remember, we are doing exactly what the Wiemar Republic did and what Zimbabwe is doing, by borrowing money from ourselves from the future to pay for today. This historically has ALWAYS led to massive hyper-inflation. Under hyper-inflation our Dollar would become worthless but those who hold gold will be very wealthy even if it is only 20% of their assets. And if we have hyperinflation, at the same time, the stock market (study Zimbabwe’s stock market to PROVE THIS) will fly higher and I am sure if huge volume comes in the market that we will have a lot of max green BOP, huge accumulation-breakouts to go long and keep up with the hyperinflation.

Chart of Zimbabwe

If we don’t have hyperinflation that would be a MUCH BETTER outcome. I would prefer this much better as we will still have the innovative technology driven companies that setup in those beautiful charts that look oh so COOL.

One more time, great luck everyone and I will see subscribers in the Gold Forums and the Platinum Chat Room. Aloha!

How does this make you feel?

The Gross National Debt:

Video two, three, and four are available at BigWavTrading.com’s Gold Forums

FREE YOUTUBE VIDEO: