So Much For The “I Must Get Long NOW” Trade
April 2, 2008
Once again, the bottom callers said there was no more downside and here we are selling off erasing all of the gains from today. Why are people trading this market? It is too dangerous. Even RevShark says the exact same thing as I do:
A Good Start, but We Still Need Some Setups
By Rev Shark
RealMoney.com Contributor
4/2/2008 12:21 PM EDT
As I mentioned this morning, the current market action is the most promising that we have seen so far this year. If we can do a better job this time of holding on to yesterday’s large gains, that will finally give us what we need for some better charts.
What has made it so difficult to build longer-term positions so far this year is that we simply haven’t had stocks hold lows and build bases. We have had a lot of oversold bounces and volatility, which make for good short-term trades. But we have had few situations where we can feel that stocks have finally started to attract fundamental and technical buyers who are looking for position trades that will develop over the course of weeks or months.
Unlike so many others, I am not inclined to declare that the worst is over. The indices are still in downtrends, and I suspect that we are going to see plenty of rocky action in the near term, especially as earnings reports start to hit. However, I am more inclined that I have been in a while to edge into some position trades and put more capital to work. It is going to be important to maintain good trading discipline, but at least we actually have a little upside momentum for a change.
………
It seems that I am in some great company as the man uses a similar style to me and incorporates CANSLIM into his investing style. We are on the same page. That page is called the CORRECT PAGE. Cash is still king, until there is more volume in the indexes on the uptrends and more HOT charts setup.
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Thanks for enabling the comments again. Don’t let a cranky poster get you down. I think good reader comments actually enliven a site.
You inspired me to go back and look at 2003’s March rally in the indices. It did indeed come on significantly higher than average volume, rallied for five days, and then pulled back on much lighter volume.
Only after that was the 2003 bull market born.
Thanks for refusing to call a bottom. I think you and Rev are the only two who haven’t succumbed to the urge.
Regards,
Kim G
Boston, MA
P.S. Nor does the current debate seem to recognize the difference between a bottom and the start of a bull market. The S&P 500 technically bottomed intraday on 10/10/02. But the bull didn’t start until mid-March ‘03. So even if the bottom has been put in, a bull market is unlikely to start until we see gains on big volume.
You have a brilliant site and I check your blog, silver longs, and silver shorts daily before even thinking about trading.
I also agree that the market isn’t quite out of the water. SPY has resistance around 138 that has been tested four times that I’m looking for it to bounce off again and now that short-covering is over, rallies are going to require significant legitimate longs, especially from institutional investors. Which brings us back to volume, which you are completely correct to emphasize. Volume must return if we are to leave consolidation/downtrends, and we’ll see if that will be the case once this short-term base rounds itself out. In the meantime, I will be looking for SPY to retrace back to support around 126, and then we’ll see if the bulls are back.
Once again, brilliant commentary. I really appreciate your site. Huge help.
I DID NOT enable the comments.
Not sure why this is open. If Justin did this, do NOT open comments for 30 days. (though i doubt he did)
If I did this, I will make sure I don’t make this mistake again.(i am sure this is what happened)
What a HORRIBLE WASTED 2 hours of my life yesterday.
Btw, GREAT ANALYSIS!!! at the bottom. Very profound for a new investor. You are WAY BEYOND newbie status. If you think you are one, you are NOT. That is a very profound and BRILLIANT event to notice.