Lower Volume Selloff Hits Stocks As NYSE Volume Is Still Below Average; DRYS, EXM, and DSX All Put In Nasty Intraday Reversals Near Old Highs
May 19, 2008
I am not going to write a long commentary tonight as I really don’t see anything too important out there that I need to spend too much time focusing on. The biggest event was the late day selloff in the stock market. However, some are forgetting that the DJIA and SP 500 still closed higher and that volume was lower on both exchanges, with volume being below the 50 day volume average on the NYSE for the 41st straight day in-a-row.
Also, don’t forget the NYSE short-interest has hit ANOTHER all-time high at 13.66 meaning that it would take 14 days to cover all the shorts on the NYSE right now, on average volume. Even without volume, the market has an upward bias and I do not want to short a low-volume market especially when the short-interest are at astronomical levels in so many stocks. That is how you end up with MXC and PDO.
At the same end that I don’t want to be short or not long this strong market, I suggest that those that CONTINUE to buy stocks the day before earnings STOP. I always take my signals on my charts, almost NO MATTER WHAT. This takes all emotions out. But when I saw that PWRD had earnings my total buy that I had planned for Monday morning was chopped by 90%. Those that were in the chat room KNEW I did this. However, those here couldn’t have but I made it clear that this stock was not safe to go long for newbies. Thankfully, I did not see any horror stories about PWRD. But I am still disappointed as I thought I had myself a possible monster stock. But since it has failed, the last thing you will see me do is justify a WRONG position and hold on to it “hoping” that it comes back. Nope, that stock, along with GA, must be taken out. BOTH of those stocks show why buying a move the day of the earnings is a bad idea. Both charts setup up a buy signal the day before earnings and had I FOLLOWED MY OWN RULES I would have a little bit more money in my pockets.
The good news is, every other large holding, besides PWRD, acted fine by pulling back on lower volume or if it had lower volume on the pullback found solid intraday support. Even with a lot of stocks looking great, I still decided that I wanted to take some profits in some stocks that have made big moves in a short period of time. The last and only perfect chart had an event happen to its setup that no longer makes it perfect. Oh well. That is a low volume, low VIX, and ETF filled market for you (sigh).
Oh well, like I said this weekend, I am prepared for anything. No matter what happens, I am ready. That means either I continue to buy great setups and ride my winners higher or I start cutting losses, taking profits, running to the sidelines and looking to get short. When you are prepared for any outcome, nothing can surprise you.
Despite the reversal, stocks are still in an uptrend but like I said some cracks are starting to appear. Did you see DRYS, DSX, and EXM today? That is not bullish. That should NOT be happening as they go to retest their old highs. If they don’t fix that and get back to rising on strong accumulation with green BOP, then I will not be interested in going long these leading stocks. Great fundamentals or not. No matter how great the fundies are, if the chart is not there, I will not be there.
Please, if you did not read my three weekend post, please read them carefully. That should put you on top of this market and when you are on top it sure feels nice. Although, it sure becomes real hard to stay up there. But that is what makes it so fun. Never give up the fight to become the best. To be the best you will always have to stay vigilant to stay on top.
By the way, if you did not know, I had my first Seeking Alpha article posted on Monday. It was also posted at iStockAnalyst.com which is publishing me too. Though they are both the same columns, soon Seeking Alpha might be FA only and iStockAnalyst would be FA with TA. We will see. I am going to start slowly. But the goal is to get 3 up a week in SA and 3 up a week in iStockAnalyst and StraightStocks. At least I now have a place to submit columns. However, I am not sure SeekingAlpha will continue to let me use the charts. Check out the column and feel free to rate it. At one point yesterday it was the fourth most popular column and being a new guy I would assume that is pretty good. I hope SA hears you all and gives you what you want. If they don’t we still have the other two.
Aloha and I will see you in the Chat Room where EVERY day is a bull market!
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1 Comment »
Joshua,
I was at lostmoney.com when you shared your longs last week. I picked up some MXC and PDO and now I have the $$$ to get a Big Wave subscription!!! Thanks so much and I look forward to more trading with you.