Stocks Close Higher On A Pickup In Volume; Volume Still WELL Below Average And Charts Are Still Very Sloppy

April 15, 2008

It was another wild day on Maui as more drama occurred in my personal life today. However, it is minor and it has been taken care of so hopefully I can get back to doing what I am supposed to be doing instead of wasting my time on other things.

Anyways, luckily for me it was just more of the same junk that we have seen the past 17 sessions as volume is still well below average and the charts still look junky. What makes it worse, is that the few good charts we had building have gone away. Not all but still it is not good.

That is unless you are focused in one area and one area only. Oil. Oil hit $114 yesterday and closed at $113.79 which is a new all-time high. I have a feeling we are going to be saying that a lot. Especially when I look at oil stocks and see that they account for almost ALL of the stock market’s strength.

There were only 90 new 52-week highs yesterday to a very large 222 new lows but what stuck out to me is that out of the 90 new highs 58!! of them were in the energy sector. That is a whopping total, especially considering that the next most came from agriculture stocks as they had 6 new highs in the group. Obviously, the oil&gas and energy sectors are the only two places to be in this market, unless you are in soft commodities/ag. There simply is no where else to go.

However, what makes this harder for me is I am watching one stock that was a VERY LARGE buy FLY without me as it shook me out hard. CLR was a buy of mine in all of my accounts including family/friends on 3/13. It immediately did something wrong on 3/17 selling off almost 6%. Immediately, 50% was cut due to it not moving higher. But the VERY NEXT DAY it completely righted itself on higher volume moving up almost 7% on the way to a new closing high. However, two days later it closes below the 50 DMA officially forcing me to stay disciplined and cut my loss. That was the bottom and since then has rallied 63% in 17 days. This is a HUGE disappointment, to say the least.

This is not the only one. I am sitting here nervous, knowing that I have just taken preventive measures to not lose profits in a solid long that was starting to look really weak, watching DAR build a nice shapely round base. If DAR breaks out and runs I will once again be watching a once solid long, turned rocky to toppy, now reversing right back higher. Not ONLY THAT, but I am sitting here looking at FFH and feel the exact same thing is going to happen.

Now, I have never in my investing life since 2002 felt so lost and confused about why this is happening. I have never seen so many stocks play the EXACT same game. They are breaking out or bouncing off my near-perfect patterns like they normally do. However, instead of moving higher, pulling back on low volume, and maybe having a big selloff BUT STILL HOLDING the 50 DMA, the stock now rallies, pulls back for one day, then swoons below the 50 DMA on heavy volume, and then moves higher then tightening up and creating nice round bases as I sit there scratching my head.

Soon to be examples of DAR, CLR, and FFH are SVR, GEF, GEF.b and soon to be a couple more B stocks. I have to be honest, I feel like in 1999 I had this method down. THIS IS THE FIRST TIME SINCE 1999 I HAVE FELT SO HELPLESS TO THE MARKET. I am finally humbled by this market as I have no clue why what has worked for me for 12 years all of a sudden since January 22nd has just gone wrong. It is the market, I know this, that is why I will not panic (plus I don’t ever panic over anything market related) but still I have never been shaken out of so many fine stocks so often. I feel like the market is targeting me personally. I have NEVER felt paranoid but for the first time in my market life I feel like I am being watched (I AM NOT, trust me). This is very odd because this is not rational behavior. Thankfully CANSLIM doesn’t involve feelings so I do not have to worry about it effecting my trading even 0%.

For example, you are not going to wake up tomorrow and hear me say “OK, bottom fishing the solar stocks” or hear me say “I am going to buy this at support and sell this at resistance.” No, I will continue to use my methodology until the day come when the market wants to work right again. I made a good amount of money during the last rally that topped out in November. From late-July to November many stocks performed beyond what most investors could have imagined as APPY DRYS MTL all made 130%, 100%, and 90% respectively in two to three months. These were all large holdings so it wasn’t too long ago things were “OK.” They were not great and have not been great since the top in April-May 2006 but after this bad market is over you better believe that we are going to have a lot of stocks that act like those and CLR DAR now WITHOUT THE WILD DAILY action.

Some signs that thing could be much better if more sideways consolidation happens is that the IBD 100 was up 1.2% and the IBD 85/85 was up 1%. This relative strength amongst leading stocks (oil leading) is very good to see even in the low volume because the bases that can be created right now could be the low volume round bases with green to max green BOP that we will need when this market is ready to run.

Obviously, I don’t think the market is going to make its move any time soon as I expect more sideways to driftless action the next few days to few weeks. It just seems that wall street has checked out. If you decide to do the same thing for the rest of the week, I can not say I blame you. The excitement will come back in and you will know that has returned if you continue to monitor the price and volume action. Once you start seeing big up days on strong volume, RUN don’t walk into the leading stocks that are blasting off.

Some stocks that are moving now that I am not long but know will make good longs on pullbacks or new breakouts are CAM, NOV, ARD, KWK, SOL, RDC, RIG, AND RRC. RRC…ugh (sigh). There it is a stock I went long A LOT OF (ask author_ego, he will confirm that I loved it) in January that I was once again FORCED to cut my loss on a couple of weeks letter. DAMN!!! If only I knew how to be less of an “active” investor. Nah, it isn’t worth it. You know why? I might still be long TASR or TZOO or Enron if I fell into the buy and hold lies.

This methodology will come back into style. It always does as history ALWAYS repeats itself. Those beautiful max green BOP charts all over ‘my past big winners’ in my longs section will return. There is one stock out there looking like it could be a future candidate that starts with the letter H. That is all I need: excellent price action, huge accumulation w/ low volume pullbacks, and a lot of green to max green BOP with no yellow or red in it. I get those three things combined in a stock with excellent EPS, sales, ROE, SMR growth and all is usually not only great but FANTASTIC.

Right now, I feel like Linus? in the Charlie Brown episode waiting for the great pumpkin. LOL. But, when you do this for a living, that comes with the territory. Things are not always easy and sometimes you get 1999 and 2003 but most of the time you get early 2002 and now 2008. It still is not easy and while it is not easy I will not be going all-in with my margin. I still believe cash is king and getting heavily long here is not right. Worse getting short! Don’t even think of doing that right now.

Aloha and I will see you in the chat room where we are always hitting new all-time highs!! Oh yeah…the put/call is at .94 so people are still buying a lot of puts. I want to be on the opposite side of that trade. ALOHA!

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