Stocks Put In A Technical Follow-Through But It Wasn’t Leading Stocks Taking Us Higher; Old Laggards Get A Big Bid As Market Relieves Oversold Condition

January 28, 2009

Today’s rally in all the general stock market indexes was very exciting to see on the surface, I must say. Sadly, the truth is, once you get past the overall general numbers of a 2.5% to 3.5% gain on the market indexes, you will see that underneath things are not as nice looking.

I want to say that while I see a lot of problems with this rally this does not mean that if a beautiful long setup came along that I would not take it. I am long eight stocks. So obviously I am not “biased” to the bear side or the bull side. I am just following the trend. The big trend is down, the intermediate trend is down, the sub-intermediate trend is flat, and the short-term trend is definitely up for right now.

My biggest problem with today’s gains are the exact same problems I found with the rally attempts back in March, July, late-September, October, and even recently in November. Those problems are that the leaders are not leading the market higher it is instead the oversold laggards that make up a big percentage of the general market indexes that are taking the market higher. That is not a problem, necessarily. The problem is that every time these HORRIBLE PAST-LEADING NOW-SUCKING stocks bounce I am told by every HORRIBLE and truthfully FOOLISH “professional” that it is time to buy these bargains because I will not get a chance to get them at a lower price. Right guys, just like in March 2008 and May 2000. Almost a full eight years later and yet the same HORRIBLE analysis.

You know these guys. They are the same “brilliant analyst” that said to buy MSFT, DELL, CSCO, JDSU, QCOM, INTC, and JNPR in 2000, RIMM, AAPL, GOOG, BIDU, and FSLR 2008, and other winners like WCOM, ENE, FNM, FRE, BSC, and LEH. So no matter how many times they lose 90% to 98% on a stock, they still come out with the same HORRIBLE advice over and over. Sorry world but this kind of crap really annoys me.

But thankfully their ignorance guarantees that those that follow a strategy similar to mine will always be able to beat their returns day-in-and-day-out and at the same time not only beat them but destroy them. When they brag about nailing the low of MSFT in 2002 and getting a “big whopping” 25% from the low in 2002 to the end of 2003, remind them about my 2,390% gain in TASR in nine months. Don’t forget to mention to them that the TASR buy was NINE MONTHS AFTER THE MARKET BOTTOMED!!!! This is something that is seen in almost every long of mine since the 2002 lows. Take a look at ERS in 2005. Did I need to buy the EXACT low in 2002 to get a 550% return in six months? No, I could have waited 2 1/2 years. How about HRZ and the 115% in seven months in 2006? Did I have to buy the exact low in the bottom of the bear market to make that 115% gain? Of course not! As you can see by going over my ‘Past Big Winners’ I could have gone into a coma sometime in October 2002 and woken up almost four years later and STILL!!!! would have made more in HRZ than “nailing the bottom” in MSFT in 2002 and getting that pathetic 25% gain.

So while everyone is out there telling you that this is the bottom, don’t forget to drop a big fat history lesson on their head and ask them a key question. That question is “how come the leading stock market indexes like the IBD 100 are underperforming the market today by around 2%?” Chances are they will not have an answer to that question so I will instead ask the rhetorical question to myself and give an answer to any of you that may be wondering why this is important.

In the past when the stock market has rallied and continued to rally in an uptrend for longer than a few weeks there has been one thing in common. That is that leading stocks led the way higher. That means that top stocks with the best fundamentals and technical setups in top industries that have been performing the best over the past year or six-months (depending on your time frame) will outperform the general market. But with the IBD 100 up 1.5% and the Nasdaq up 3.5% today obviously something is not right.

Just like off the November lows, the IBD 100 is lagging, and if this continues I do not expect this rally to last very long. Now, can volume come in higher later on while the market rallies higher and help the market look more bullish? Yes. The only thing is that besides higher volume confirming the move higher on the general market, we need to see leading stocks in leading sectors move higher. This is the only thing that will keep the market afloat when the lagging EX-leaders start to lose their juice as investors jump in to sell the shares that get back to their breakeven points. A lot of investors bought these PAST-leaders on the way down thinking they got a bargain. Now, most know, that they got a BOMB!

Hopefully, if this market continues to rally, our longs can start to look better as they move higher, new longs can setup with huge accumulation days and max green BOP, and then we can go long those new “HOT” setups to go with our current stocks that are in solid positions to move higher.

I would go MUCH DEEPER into this but subscribers have gotten a TON OF INFORMATION already on the Forums and the Chat Room. I recommend that EVERYONE that is a subscriber to this site watch video one and video two!!!! I know some of you can not always watch every video that I produce but these two videos are a must right now to know how to deal with this market without letting your emotions get the best of you. The second video will also show you stocks that we have our eyes on for future longs if things actually do get better with strong volume. But if in your heart you think things will get ugly soon after this rally fails, if it fails, then you can watch video three and get your fill of information on possible future shorts.

The bottom line is that even though this market has gone nowhere the past three-months+ I am still on top of this market and ready for ANYTHING that it has to throw my way! Please, watch video one and two, and, of course, if you have time, watch video three. ALOHA and stay safe and warm out there! It is SUPER COLD out there and we really need some global warming right now don’t you think.