Don’t Ever Buy The Market When It Is In A Downtrend; Bottom Callers Are Wrong AGAIN

October 6, 2008

Stocks collapsed intraday, once again, on Monday, with the Nasdaq down 8.7% intraday and the DJIA down 800 points at the lows of the day. However, a sharp rally back from those lows, into the close, gave the markets some much needed relief, as there was a lot of fear at those intraday lows today. At the close, the SP 500 was down 3.9% and the Nasdaq was down 4.3%, on much heavier volume than on Friday. Volume on the Nasdaq was substantially higher, however it was clear that this was no capitulation as volume was not the heaviest in the last year much less the last month!

Some things that should be taken into perspective, before the morons who keep telling you to buy stocks (ie..Cramer) on the way down call another bottom, include the VIX, put/call ratio, and volume.

First off, the VIX hit 58 intraday which was the highest level I think I have ever seen. When I went back to do my research it showed that the VIX hit 60 in 1998. However, I don’t remember if it hit that high back then as I was not focused on the VIX at all back then. IBD shows that the last time the VIX has gotten this high was back in 1987. I assume IBD would be right over me so we have to take it in to consideration that today’s VIX hit a level not seen since 1987.

The put/call ratio hit 1.3 today and that is nowhere near the highs of 1.5 to 1.6 back in March when MOST PEOPLE WERE FOR SURE that we had seen a bottom. Those same fools that cursed me out back then have more than likely had their butt handed to them the past year. They get what they deserve. But for us we must see that there is something oddly wrong with the VIX hitting highs not seen since 1987 yet the put/call shows fear not even at the levels we saw in March! Craziness.

To go along with the put/call problem (problem for bottom callers), we have volume that is nowhere near 1987 levels that made a reversal look VERY LIKELY. The volume today was about even today as on 9/29 for the NYSE and volume on the Nasdaq was still lower than the volume seen on 9/18 and 9/19. So for anyone that tells you that today was a capitulation day, you can throw these volume stats back in their face and tell them to compare the volume on today’s bounce back to the 1987 reversal off the lows intraday. I think you will be able to CLEARLY see the difference if you have charting software that goes back to 1987. Volume was more than double the 50 day volume average on 10/19 and 10/20 in 1987. Volume was so much higher on those two days compared to any other day in THE HISTORY OF THE DJIA that is was COMPLETELY CLEAR that a bounce from those levels could lead to a bull market.

Right now, we have nothing close to that. However, with stocks so far below the 50 day moving average, if you have been blessed to be short the stocks that I have gone short, YOU HAVE TO TAKE SOME PROFIT IN THE MORNING. If you have held shorts below the two Monday crashes and you still have not taken any profits, you need to check yourself and your greed at the market’s opening bell on Tuesday. It doesn’t pay to hold out for the lowest price when you are short. When you get gifts like we got today, you need to put some of that working money in shorts back in cash. If you are short anything with a 50% gain or more, you should have at least 1/2 covered by now. Pretty soon, we should see a good short covering rally that could last for a while. I sure would hate to give up a lot of these gains by being too greedy. Anyways, what is wrong with cash. With so many US Dollar (DXY0 on Telechart) bears out there and a nice bullish chart, I know that I would rather be long the US Dollar than the Euro at this stage of the game.

The trend is your friend folks. If you lost money this year, you obviously did not listen to me. The whole year I have preached CASH IS KING. There was no excuse to be trapped long on Monday, after last Monday. Remember, people like Cramer are not your friends. That is why TSCM is hitting new lows. The market sucks and Cramer sucks. I watch this guy and all I can think about is all the money he is going to cost you. If you are one of those people that watch and listen to Cramer, I just have one question for you. Why??????????? He can’t possibly make you money or save you money. It is time to grow up and get on the CANSLIM train. So many people are going to miss this next bull market it is sick.

People like Cramer ensure that I will ALWAYS have a job in the stock market. I’ve only said this 100 times this year…CASH IS KING!