Fear Grips The Market As A Nasty Intraday Selloff Finds Some Solid Support; Lower Volume Should Concern The Bears
June 2, 2008
With about 1 1/2 hours to go during the market session, I made the comment that this nasty day sure would be a lot better with a late-day rally that sent the stocks well off its lows. Well, for once in my life, I got what I asked for and the market did what I asked it to do. It was more of a desperate attempt at trying to control the market as it was an educated guess of a public that is extremely bearish. I don’t know where the put/call was at the HOD, but I know where it ended and that is above 1 at 1.01 according to Investor’s Business Daily or 1.17 according to my IB platform (at least the last time I checked). This kind of fear on a lower volume selloff is just what I like to see when the overall market pulls back.
Fear is a good word, I think, to describe today. I mean ALL I saw was negative headlines when I went to check why I was waking up to a mini-blood bath (in my account) all I could see was bad news. The ISM fell for the 4th straight month, 6 out of the past 7 months construction has fallen, Bradford & Bingley (England) issued a poor financial outlook, Henry Paulson said housing could get worse, WB CEO was forced out, the WM CEO is being removed, oil was higher and closed at 127.76 which is almost double from last year’s 65.08 close, and S&P cut its ratings on three bank stocks which weighed on financials. Did I miss anything? Oh, How about the talk of the Nasdaq losing the 200 day moving average or the DJIA losing its 50 day moving average. Those are also negative headlines and continue to reinforce the fact that all news is bad news to the biased-media.
What I find comical about today’s action is all the bank stocks. I was being lambasted by the fundamental guys all January about not buying the bargains and the “for sure” bottoms that were out there. Well, I think the action in JPM, MER, LEH, and MS–all stocks caught in the S&P downgrade or the fallout from BSC–paints a picture of who was the smarter investor. I told you, like I told those idiots, that you did not need to nail the bottom of the downtrend to make a ton of money in the next bull. Those fools told me I was wrong and that by not buying JPM, LEH, MER, and MS that I would be paying for it in six months. Well here we are about six months later and all I can think of doing is thanking God for me not listening to all of those bafoons.
What those morons fail to understand is that history always repeats itself and history says that a past leader will 95% of the time not be a new leader in the next bull. The financials have had their day in the sun and they are done. I have moved on to more exciting stocks. Four recent longs have proven that my strategy is still the superior strategy. If you woke up last night, out of a comma that you went into the day that the market bottomed on 1/22 and 1/23, and then you went long 4 or 5 of the new longs that I recommended Friday you would be very wealthy and look a lot smarter NOW than those that actually NAILED THE BOTTOM. Way to go!!! You got the bottom and bought the banks!!! Wow. Congratulations idiots, you now all have between a 5% gain to a 25% loss. The comma guy: he went long ROYL AVAN XCO and BEAT (all new longs on Friday): that is a 43% gain, a 28% gain, an 8% gain and a 7% gain in one day. There should be a lot more to these stocks too. These ALL should NOT just be one-day-wonders.
Don’t think that buying ANY OF THOSE stocks will put you in the land of “for sure profits.” All of those stocks are now extended from proper buy points and nobody should even consider going long any of these stocks up here in the stratosphere. What you can consider going long are some of the stocks that are being listed in my “possible future longs” area in the forums. Some of those, as you chart readers can see, are very beautiful and if they continue to setup in a proper base with green to max green BOP we could have some exciting future winners if this lame rally turns into a heavier volume rally. So far it isn’t working out, but stocks that I am long like GEOI up 171%, PDO up 122%, and a stock I should have been long but passed, MXC, is up 269% since I made the intelligent decision to pass. All of these PROVE, for the UMPTEENTH-THOUSANDTH TIME in the past 12 years that the CANSLIM system or a methodology similar to the CANSLIM system (maybe you incorporate “value” with it or lower-priced momo stocks) is far superior to the average intelligent investor than almost ANY OTHER STRATEGY out there.
Just because someone is doing well daytrading or buying stocks off the bottom does not mean it is the right way. It is the right way for that person. This strategy that I incorporate is great for everyone that is WILLING TO WORK for a year or three as they learn to put all the pieces together. Trust me, my friends, when you complete that puzzle and have either made a lot of money investing in the market or “feel” that you fully understand the CANSLIM system, there is a feeling of empowerment that can not be taken away by anyone. Only death can defeat it. I know from this age of 29, and since the age of 15, that this is/was all that I am ever going to do with my life. I will forever be able to make a living off the market as long as we have movement somewhere. We all clearly know where that movement is now: oil stocks!!
However, one day this group will top and when I look at the action in stocks like ANR, BEXP, FST, EAC, PVA, CRK, CWEI, and CLF on weekly arithmetic charts I know I am looking at stocks near a top. I know CLF is not in there but if you get a chance to pullup a weekly arithmetic chart you can see a PERFECT CLIMAX TOP about ready to set in. The three splits 2-for-1 splits since the run started is also another classic sign of what you see in a stock that will top–multiple splits. The market is up and the market is down making it very hard to make money but if I can keep my eye out for the climax top in these stocks that may help me learn when I should take the majority of my profits out of the longs that have gone on exponential runs. They should give me price and volume clues on the way up, along with the market action, combined with the topping action that should allow me to pretty much nail the top of the uptrend. Only a slow and quiet death could throw me off my game as a low volume rollover that turns into a heavy volume selloff would be the only selling that would upset me.
However, I don’t know how many more people are left to sell. It seems like the market is just continuously climbing a wall-of-worry. I mean on a day when the Nassy falls 1.2%, the SP 500 and DJIA fell 1.1%, and the NYSE falls .9%, you would think with those negative headlines that volume would pickup. But nopo!! The perfect way a market should proceed has started on Wednesday when the market rallied on higher volume. That pattern, of higher volume gains, continued on Thursday and Friday, with the market pulling back on volume 9% lower on the Nassy and 19% lower on the NYSE, on Tuesday.
This leadership in the market is iffy and the fact that I have so many near-perfect charts starting to show up and YET STILL only some of them are producing some nice returns is a very troubling item of interest for me. However, I have a lot of near-perfect stocks that just need to start moving higher out of their consolidations to turn from mediocre stocks to all-stars. I have so many stocks that I bought with a near-perfect chart pattern, have watched the stock start to rise but then go into a lower-volume drift that now I wonder if they are worth holding. If these can just get to moving higher, they would become near-perfect again. Remember, just because a chart is loaded with max green BOP does not mean it is an automatic buy. I have had so many beautiful charts fail that I know better to think anything is bullet proof. That used to not be the case. I would say since I nailed the top to the HOUR on ERS back in 2006, the market has been hard, offering me very few perfect charts and when it does offer me them has so many fail. This is not the old market I fell in love with. Sometimes I wonder if I will EVER have another 1999 or 2003 ever again. I know that is crazy talk but here we are in 2008 and we definitely have not had a year like 2003 since then.
I am hoping that this market slowly turns into a market like 2003. However, unless a LOT more volume starts showing up on the indexes I doubt we are going to have that happen. If the low volume continues, there will be more BKE type stocks that start out perfect and just turn into an utter failure of a potential monster stock. Folks, it is NOT my fault they fail. I get you in the HOT charts that used to offer me easy 100% to 2500% returns almost every time they show up. Now, they simply do not work. I am not sure if it is because more people follow me or not but this trading session has reassured me via ROYL and AVAN (up 42% and 28% in one day) that there is plenty of room for everyone. THE MARKET IS JUST CRAZY. But remember to study those BEAUTIFUL chart patterns of 1999 and 2003 because when they show up again not only will the chart patterns make us a lot of money you can be sure there will NOT BE a lot of failures. Everything will work and everything will work really well. The best bet for monster stocks is a high VIX (preferably around 30-50) and I have to admit I was VERY HAPPY to see some real fear come back into the market as the VIX jumped from 17.83 to 19.83 which is a 11% gain. It might not be 30-50 but at least it is a pop!
The pop in the VIX, along with the investors intelligence showing bulls collapse from 50% to 37% and bears increasing to 32%, and the put/call finishing above the 1.00 line again at 1.01 (or 1.17—I don’t know which one to use anymore) has me feeling a lot better that all these green charts will move higher. However, if all these green charts turn into yellow and red charts, I will not think twice about bailing on this market. I am still scanning my shorts and I, historically, do NOT scan for shorts in a bull market. But this bull market is so lame and I have so little true faith in it just yet that I continue to hold a couple shorts and look for others. That will not change until a LOT more volume enters this market on the bull side and helps knock down that NYSE short interest of 13.95. A big gain on volume well over 20% above average would have me a LOT MORE HAPPY about the future of the stock market. However, for now, until I learn how to predict the future, I will just take what my charts give me.
Aloha and I will see you in the chat room! ALOOOOHA!!!
PS: How about that Pittsburgh Penguins vs Detroit Red Wings game five!!!!!!! 3 OT’s!!!!! This has been a great past five days for sports!!!!!!! NO DOUBT!!!!!!!!!
Comments
2 Comments »
I’ve been a Platinum member since March and have probably taken only 20% of Joshua’s recommendations because I only act on his CANSLIM stocks. I’m very conservative b/c I’m managing 4 family portfolios totalling over $2 million. My largest port is up 12% for the year, my two kid’s accounts are up 9% and my IRA is up only 5% mainly because I haven’t done much with that account.
When I first started I thought of this as “aggressive” trading because the stocks are higher beta, higher PE stocks but I’ve found it to be quite the opposite. We’re buying Leading stocks with upward earnings and price action. I swear, it seems like they never go down and the few that do drop, Joshua has gotten me out with small gains. POWL has been gigantic for my portfolios.
I hope that as I get more comfortable with this process (it’s way different from the “value” investing I used to do) I can pick up more of Joshua’s speculative type stocks so I can put up some amazing numbers.
Do yourself a favor today. Join one of Joshua’s membership levels and PLEASE dont buy a bank stock. Those value traps are portfolio destroyers.
Good Luck
WOW. Thank you so much. This makes ME SO HAPPY TO READ THIS.
This means a lot to me!!! THANK YOU!!!!!! very much Tom.
I am glad I am having this kind of impact on your family’s future. I just hope the 16 yr old is watching.
Probably not.