No Doubt About It Being A Great Day But Before You Get Too Excited Study Your History About Bear Market FOMC Meeting Rallies. They Are Always Big But As 2000-2002 Taught Us Be Very Careful About Believing In Them.

August 5, 2008

I know that sounds super cautious but in this market a lot of people are quick to call this bear dead. That is my first clue that we are probably not dead. The second clue is that I clearly remember my biggest gains destroyed day during the first trading session of 2001 when the Fed hit the market with a surprise .50 basis point cut. The market exploded and destroyed my profits and shorts. About two months later if I would not have been scared out of my shorts I would have made a lot more money. I sure did lose a lot on that FOMC rally in a bear market.

Thankfully, do to this history lesson I do not get too excited when I see such a bullish day as today. I am grounded, in other words. Did you notice that volume was below the 50 day average volume on the NYSE despite the rise and that it was only barely above average on the Nasdaq. For those that know FTD histories about launching new bull markets know THAT IT WILL ALWAYS APPEAR THAT THE MARKET HAS MADE THE MOST OF ITS GAINS WITHOUT YOU. But by just looking at history you know that is not the truth and that missing out on those initial gains does nothing to prevent huge returns in your stocks. My problem with today’s rally is that it did not have that HUGE VOLUME and HUGE PRICE gains that come with the CONVINCING bottoms of the past. That has thrown me and is the reason I doubt we have nothing more than a trading rally here. WHICH I WILL GLADLY TAKE HERE!!! I will take anything that gives more charts like the stock that was near-perfect and is now up almost 17% in three days. Those that have studied their past and know what perfect charts looked, or those that were in the chat room, knew that we had a potential n this one.

However, the problem is we just have one stock near perfect and tonight my BOP scans, which alert me to possible great future longs, are still dry. If this was THE BOTTOM we would have 10-20 stocks with patterns similar to APII and EMIS. That is huge volume and BOP coming off the lows. We, personally in my ow opinion, would be seeing a lot more hotties. Does that mean we can’t soon. Absolutely not. We have a ton of retail, bank, and tech stocks that if they could make one more base on top of the base they are coming out of now, for example DRIV if it could make one more green to max green BOP base and breakout would be perfect.

So we are getting there but we are not there yet. When I get done with my major long scan and go over some other charts I will return iwth another nightly post.

Aloha, for now.

Posted by Joshua Hayes | Filed Under Market Commentary

Comments

1 Comment »

Comment by Joshua Hayes

2008-08-05 15:54:20

It was good, the volume is better, But where are the massive volume on these rallies…oh yeah and why was the BEST leading sector of the top five only with a C+ range (retail-discount)

I’ll tell you why…because it is a strong bear market bounce.

I will play it and already have with a couple of winners. But i have to admit, once again, I am not making a lot of money because the volatility even though it doesn’t show up in the VIX is killing me.

If I can get some more charts like my near-perfect beauty with CANSLIM, then I can load up and feel safe thata we can go 200% to 500% long if you like.

Right now the OOMPH is not there. TRUST ME. It amy be later but RIGHT NOW it is not.

A great day but you need some follow through to trust anything that is below the 50 DMA like the indexes.