So Much For A Bounce-Maybe We Will Get One Later This Week; Stocks Officially Kill Rally Attempt From The 11/12/07 Lows

November 19, 2007

I expected that we would get a bounce as oversold as we were coming into Monday. But proving to EVERYONE, once again, that you never know what the market is going to do, the market decided to selloff. The only good news, for bulls, about today’s selloff is that the volume was lower than the volume on Friday. However, Friday’s volume was skewed to the up side thanks to triple witching of options. Still, the damage done by the selling was bad enough that volume really doesn’t matter.

At this point it would seem that we have come too far too fast on the downside and that a bounce must be soon. Well, if the market can’t bounce when the fear picks up in the put/call ratio and the market gives oversold readings all over the place, then maybe we shouldn’t expect a bounce. And even if we get that bounce should probably not think about going long that bounce because it is obvious there are no large bids for stocks currently.

One of the oddest things I saw today was that the VIX barely moved while the DJ, SP, and NYSE decided to fall 2%. With all of those indexes now below their recent lows on 11/12, the VIX should now be making a higher high. However, it has not and in fact is at a pathetic 26. This is a very complacent level and indicates that despite the selling no real fear has entered the market and even if we do bounce we should continue to expect the market to selloff.

I guess the low reading in the VIX then confirms my suspicion that the 1.19 put/call on Friday was options related activity due to the triple witching. Confirming that would be that the put/call FELL to 1.01 today. Since it is quite obvious to me that some people are not paying attention or are being very lazy during this pullback I will say it once again: IT IS NOT BULLISH WHEN THE MARKET FALLS AND THE VIX GOES NOWHERE AND THE PUT/CALL FALLS. If there was real fear in this market, which is what is ALWAYS needed to have a real bottom, the VIX and put/call would be jumping!!! The put/call would be at 1.20 on its own and the VIX should be near 35, if we are to believe that the bottom could actually happen right now less than one month after the selling started.

If this was a normal pullback, I will remind you, once again, I would not be focusing on all of this. I instead would be bringing attention to the strength of the market, the strong internals, and all the nice charts that I see. We do not have this, however. And since I see extreme weakness everywhere yet still hear a TON of people talking about buying the bargains, I will remain on my defensive posture.

I have to admit that I was not wanting to short a lot of stocks right here because I thought the market was a tad oversold. However, I thought that way on Friday and look what the market did. So I am beginning to think this market is so weak that it could fall on low volume for a while if it wanted to.

So even though it is Thanksgiving holiday trading week which is normally bullish, we have started it off on the wrong foot and that might carry over the rest of the week. However, we do not need to know what is going to happen this week as long as we follow our charts. And that is what has me sort of impressed.

I found three very high reward/low risk shorts and five stocks that are easily putting in a top, IF THE MARKET IS TOPPING, because I have seen these patterns before. When you have EVERY SINGLE leading stock and EVERY SINGLE big-cap tech stock putting in heavy volume reversals after long uptrends, it simply doesn’t get any louder than this. You have to realize that all of this distro, with all the FUGLY charts in C, WM, YRCW, ETFC, RDN, and all these other stocks, along with the top tech growth stock and top growth stocks topping that the smart play is shorting the rallies and not buying the dips.

So in that theme, there are eight shorts tonight, when I thought that there would be none due to us being so oversold. The fact that this many are breaking down from some sort of important resistance or breaking down below support makes it appear that this market can continue to sell and get more oversold.

If the market continues to selloff from here, that is fine with me; I can sell off the rest of my leaders that are still above their 200 dma’s, I can take profits as my shorts crater, and if I can’t find anything I can raise cash for that moment when everything is just right.

That moment, if we want a perfect bottom, will look like this: investors intelligence 55% bears 45% bulls (minimum), put/call at 1.5, VIX over 45, the Acc/Dis ratings of the indexes an A or a B, many stocks starting to breakout or near the end of perfect setups that are full of green to max green BOP, and absolutely nobody you know will be bullish about stocks. When you see this, then you know you are buying right and about to get rich if you have margin. That is the moment to go all-in on any top leading growth stock breaking out of the just mentioned setups.

Until then, we continue to be ready for anything and everything. If you are not ready for anything and everything, maybe you should spend more time in the chat room and ask more questions. Even though I am not the best at answering questions that I think are pretty mundane, it is still the best way to learn and the fastest way to learn. I have been around a long time. I have seen a lot of different markets and have studied every type of market going back to the 17th century tulip bubble in Holland. If you don’t know about that, that was the worst bubble ever: In 1623, a single bulb of a famous tulip variety could cost as much as a thousand Dutch florins (the average yearly income at the time was 150 florins).

Aloha and I will see you in the chat room!!!

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