Santa Claus Rally Come Right On Schedule; If You Would Just Focus On Your Charts You Would Be Making Money–Don’t Listen To Ben Or CNBC
December 21, 2007
It is the Christmas Holiday season and everyone is rushing around trying to finish up the last minute shopping. Luckily, I have gotten most cards and gifts mailed out to the mainland. However, there are still some things to wrap up here on Maui so I am going to write a nice commentary for the weekend and will probably avoid updating this section unless something amazing happens. You need to still check in because I might add something here and there. But for the sake of my girlfriend I think I need to spend more time with her this Christmas. I have been working on the computer too much and think it is wise to spend more time with the little family that I have on the islands.
So hopefully you all understand and don’t hate me too much. But like I have been saying, and the volume is proving, most traders are already taking the sessions off. And as soon as I warned you all to not short a dull market we get a very nice dull market rally with the IBD 100 up 1.6% and the Nasdaq up 1.5%. This is the exact rally that I was warning all of you extended shorts about.
This Santa Claus rally has the feel of every other Santa rally except that the action is very bullish with every session having a very bullish intraday reversal and a close at or near the high of the day. That makes this rally very bullish on the short term. However, as you obviously can tell the volume has been very low on the NYSE and the Nasdaq with most days below the 50 day volume average. Even with Nasdaq volume slightly higher the fact it is below the average shows that there isn’t a ton of funds that are stepping all over each other to buy stocks here.
But, obviously, the bears and hard sellers of stocks have stepped aside and are letting the bulls take control. For those who are gold subscribers and have access to the forums, you can see the list of longs that I own that have ‘pretty’ charts by looking at that section. There are many longs that I have that are well into what I would consider large positions. They are not HUGE like an HRZ, AFSI, TESO was but they are still making a good impact on my accounts. As long as that keeps on happening I have to remain semi-bullish on the short term.
However, with all of this happening, my shorts are still holding. In fact, most are not rallying at all and a lot finished lower on the day today. Two of the three shorts I had to cut today were also premature shorts (AMZN RIMM). AMZN and RIMM are still above their 200 dmas, making them poor shorts. However, I guess I have a dream of getting in early. So far the dreams have been nightmares but once they setup like an RE, for instance, then I bet the outcomes will be better. The only other sell was my most recent short. Everything else I am short, is acting well.
When your longs are doing well and your shorts are doing well, it becomes clear that not only am I on top of my game in this very crappy low-VIX (20.58!!!!!!!!!!) environment but that the market is in a lot of different ranges on different time frames and is making for a rough ride. Hence why none of the longs and shorts are making HUGE gains in a short time. Patience is the only way to make big money, unless we get more COH and CLP type stocks (both lost over 25% in under two months making them perfect shorts). But to get the 400% gain like my MOS finally did, you must be long a minimum of one year. Which is a great deal in and of itself since short-term cap gains are converted to long-term cap gains. It is a fair trade off. However, I would rather have 100% gain in a month, month-after-month. But you take what you can get.
And what we can get right now is not much but it is bullish and since Santa Claus has come to tow we must respect that he is in control until volume comes back in and only God knows when that is going to happen (unless you don’t believe in God then nobody knows). My guess is that it will not be until after New Years Day. So have fun in this low volume market environment but do not forget your cut loss and profit taking rules. And if you don’t know the cut loss or profit taking rules to forget, then you need to ask Santa for a few of those books on my ‘books’ list and get to reading. Only the prepared mind can make money consistently in this game.
One more thing before I go, don’t marry this bull. The crowd has already embraced it, proving that they are NOT bearish. The put/call fell from .89 to .49 in one day and this could either be due to the options expiration or the fact the crowd got very bullish ahead of the rally. Either case, it is still odd to see this ratio drop so hard so fast. So that combined with the bullish investors intelligence survey and low volume rally could lead to a bad ending for this bull. My green charts are the key. When the selling resumes, if they go from green to yellow then I will be ready for more shorts–the increase in distribution will obviously be the other sign.
I hope everyone is doing as well as me. I am now 100% for sure, baring a disaster, that I am going to avoid going back-to-back months with losses. It appears my streak from 2001 is still in tact of not having back-to-back months of losses. From down 5% off a huge mistake to up 5% in less than two weeks. What is best about this story is had I given up and stayed long ASYS, I would have been hit with a 25% CRASH and then not only would have lost money there but would not have shorted the shorts and gone long the longs that have done so well for me the past seven trading sessions. Amazing how well you can do in the stock market by just following your hard rules and being vigilant. Had I decided to deviate from my rules, I would have been hit with a large loss. Amazing how that works out.
Aloha and I will see you in the chat room!!
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