Nasdaq Throws Up A Distribution Day Immediately…That Is Not Bullish
October 14, 2008
Well a lot of people were for sure that we would be up 5% or 7%, if not more, were sure upset to see us close lower on higher volume. That had to sting the perma-bulls who are really nothing but TRAPPED LONGS. Too bad that if they would have taken the time to study how the actual market works they might have gone to cash at the appropriate time. Instead of being upset that you “missed” the 11% up day, you should be thanking GOD HIMSELF that you are cash and avoiding this market. Only the biggest and most arrogant person would dare be long this market in the face of everything that we are witnessing in the credit and housing markets. It is stunning that people can see the ugly action in the market and still TRICK people into thinking “it is a buy of a lifetime.” It sure is! It will take a lifetime before you see a 100% return ever again if you buy stocks here.
Most people simply do not know or understand that the market is not safe to go long here. The fact that the government is stepping into the market should have EVERYONE worried. I simply can not see how the worst is over when I have 25 short positions and 3 long positions with 0 possible future longs setting up. The fact that I had only one full cover out of 25 shorts the past three days tell me that the trend is still down. The fact that I have absolutely ZERO max green BOP filled, heavily accumulated, tight pattern building stocks with ZERO CANSLIM stocks setting up in proper bases is my tell that the trend is still down. Remember, I am a trend investor. So if the trend was UP, I would not have ANY shorts and I would have 1-50 longs. The fact that I have only 3 longs with NOTHING! setting up should make everyone very worried on the intermediate to semi-long term.
When I go long stocks, I am not looking to hold the position for one day to one week. The only way I would hold a position only one week is if it was like BFUN or MAMA. If you don’t know what those two were like then you don’t know the kind of quick gains that you can get buying breakouts. Both stocks made over 200% gains in VERY SHORT TIME frames. BFUN was a 300% gain in two weeks and MAMA was a 200% gain in two weeks. As you can see the trend being your friend is very important to make the big gains. However, most of my best longs take one month to one year to realize their 300% to 3000% gain. EGHT was a 300% gain in one month but TASR was a 2,900% gain in 12 months. So, for all of you that are looking to trade stocks for a day to a week, I have one question to ask. Why???
I currently have many shorts that have produced big gains in short time frames like MOS with a 60% gain in one month. Obviously, common sense SHOULD TELL YOU that to make the big money in STOCKS you are going to have to HOLD them for more than one day to one week. So why do I hear so many people that are mostly COMPLETELY IGNORANT to how the markets work complain about missing an 11% up day when they just lost 40% in their IRA. It is simply MIND BOGGLING to an extreme.
You would think more people would learn how the market works via long-term successful people like Jesse Livermore, Nicolas Darvas, Gerald Loeb, William J. O’Neil, or Stan Weinstein. However, the sad fact is 99% of people out there have only heard of maybe one of those people. What is even more sad, I would say 90% of investors/traders out there have not read all the “classics” by these amazing investors. If you are one of those people that have not read all the works by these authors then you know what you need to do right now. That’s right; you need to go to Amazon.com and buy them right now, if you are SERIOUS about MAKING BIG MONEY. If you are not, then keep on believing you can catch every little nick and turn in the market. The smart investors will continue to focus on the MAJOR TURNS while you slowly (or quickly) burnout of the stock market.
Listen folks, sometimes there is a time to be very long and sometimes there is a time to be HEAVY CASH. That time is now! Unless you know how to short properly and not chase a falling stock. If you can be disciplined and wait for the perfect short entries, then by all mean SHORT SHORT SHORT. That is how the BIG MONEY is going to be made now. It isn’t going to be made on the long side until we have HOT MAX GREEN BOP FILLED, HEAVILY ACCUMULATED stocks building TIGHT CHART PATTERNS. Until we see those and CANSLIM leading stocks moving higher and breaking out, there is no way this market is going to go anywhere fast. I have been through enough bull and bear markets to know this by now!
The fact that I have the returns in bull markets and have the returns in this bear market SINCE NOVEMBER MIND YOU should be enough to prove to everyone that to make big money in the market you have to enter the stock right and HOLD HOLD HOLD. This goes for longs and shorts. If you like action and want to daytrade or hold for only a few days, you better focus on stock index futures. There is NOT ONE DAYTRADER THAT I KNOW who daytrades stocks ONLY that I know with a better 5 and 10 year record than me. I have also never seen a daytrader hold any 1,000% or 2,000% winners. I don’t trade for pennies. I trade for a lot of dollars. And if you don’t think I have ever daytraded before, you are MORE than wrong. I did that crap for the first 3 months. However, I was doing it with CANSLIM stocks in Investors Business Daily. That is the only reason I probably did OK during that time. But then I studied all of the past big winners in all my books and then I studied AOL and IOM of 1995 on Telechart and I WAS SOLD! Since then there has been no looking back.
The bottom line is: if you miss a day of this market, it is NO BIG DEAL!!!!! Some of you guys out there THAT ARE NOT PLATINUM OR GOLD MEMBERS (Isn’t it funny how my premium members give me NO PROBLEMS!!!!!!????) are freaking out in this market from not doing enough. Listen, it isn’t my fault you did not go short the stocks I went short from November to January or the past two months. You could see this market break down. I never once got extremely bullish during the downtrend. I HAD A LOT OF HOPE IT WOULDN’T GET BAD but I was NEVER a bull in this downtrend. The fact that I built up so many shorts after not having many from October 2002 till October 2007 should have been your clue that something was changing. The other clue was that in 2007 for the first time since the FTD of October 2002 I had more “perfect” long setups fail than succeeded. If those two things didn’t have you going from bull to bear, well then you do not know the stock market and YOU NEED TO GET WORKING ON THAT.
Instead of getting upset that you missed a great bull and getting upset that you missed the gains on the short side, you should thank GOD HIMSELF that you were at least in cash. And if you read me and still lost more than 10% you need a LOT OF WORK!! I mean how many times HERE did I say “cash is king?” I think it was at least 50 and possibly 100 times. I know in my chat room I said it around 1,000 times. The point is stop trying to play for the little turns. Instead learn how the big money is made on the long side and learn how the big money is made on the short side. Then maybe you will STOP watching THIS STUPID VOLATILE MARKET DURING THE INTRADAY.
If you do watch the market REAL CLOSE intraday and you are a NEWBIE that is trying to learn the CANSLIM method because everything else has failed (well surprise surprise…who would have thought wall street never had your best interest in mind) then you need to step back NOW! This market is not to be watched closely. Only an idiot would watch the market REAL CLOSE HERE when you have an intermediate term time frame. Let the shorts work or stay safe in cash. Those that bought at the EOD on Monday or this morning sure paid for it today. Maybe a lesson should be learned. And anyways so what if this market rallies for a month. What is the point if it is just going to rollover in a month or two and continue with the downtrend for another six months. Does that make sense to you?
CASH IS KING for most. But if you know how to short, I am sure we will have a LOT more candidates in the upcoming few weeks if this market falls apart as fast as these setups look like it is. Even if the market doesn’t fall apart, there is NOTHING to buy yet. Until these setups show up in my scans, there is nothing to do. Let those shorts ride and let that cash sit comfortably on the sidelines. Also, don’t forget, the god of the fools (you know, Jim Cramer) is down over 35% this year. So the next time you go to watch him on TV, remember I am down 7% in my WORST account (up 20% in my IB account–biggest). His style is NOT GOOD FOR INVESTORS. There is only one more way to invest that is more dangerous than daytrading. It is the exact extreme: buy and hold. The truth is is that it is “buy and hold until you fold.” All stocks top! ALL!! There is NEVER a “good” buy and hold.
Now you are ready for Wednesday’s opening bell. ALOHA! 
LIFE IS GREAT!!!
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Straight from the IBD Big Picture:
Both those heavy losses and Monday’s huge gains call for patience and prudence on the part of growth investors.
One day of gains, no matter how large, isn’t enough to signal an all-clear for the market. Don’t try new buys until you see more signs of a healthy market.
As The Big Picture has noted repeatedly in recent weeks, buy opportunities are nearly nonexistent right now anyway. Most stocks remain below their 200-day moving averages. Few have built anything close to a proper base.
Stay patient, watch the major indexes’ daily price and volume action, and keep an eye out for those rare stocks that hold up best as the market gropes for direction.
…if you don’t believe me, maybe you will believe IBD!
I guess the days end headlines confirms your thoughts….. Not that I question them at all…. I am just an avid follower….
Just wanted to say thanks for all the great and valuable analysis. All I can say is that I wish I had found your site sooner. The videos are awesome and full of important lessons. My gold membership is completely worth it and I am learning a ton. Thanks again for all the hard work.
YOU ARE VERY WELCOME, Eric. Thank you for being a part of this great O’hana (family)!!!!
Like I said, I never have problems with Gold and Platinum members. It is ALWAYS the Silver and Free. 
Thank you!!
LOL Joey. If you question me…you are just fighting the trend. Why fight the trend? It is STUPID and IGNORANT!!! Remember that, all of you Tuesday morning buyers.