Stocks Put In Another Bullish Intraday Reversal Sending Stocks Off Their Lows, Despite Losing Ground Across The Board
November 6, 2007
Stocks sold off today, on lower volume, but anybody that was watching the market intraday has to acknowledge that the bullish rally was very nice to see-that is if you are a bull. However, despite stocks moving to new intraday highs they could not manage to hold on to the gains and managed to pullback a bit into the close. Still, overall, it has to be considered a bullish day considering the Nasdaq’s close was higher than the open and on all the indexes you can, once again, see those nice bullish intraday reversal by looking at all the tails that litter the charting landscape.
These tails, along with most indexes still above the 50 day moving average, are clear signs that the bulls are still in control and being long is the right play. However, I am starting to notice a few things that are making me wonder exactly how much further we have to go to the upside. This could mean either short term or long term, I don’t know. The one thing I do know is that NO ONE knows the future and those that do are full of shit. So, in saying that, lets tell you what I see.
The first thing I have noticed is that the amount of new lows continue to beat new highs no matter if it is an up day or a down day. Today once again there were about 290 new lows on the Nassy to about 60 new highs. It was 250 to 60 on the NYSE in favor of new lows. This is a sign of a very weak market underneath the few big caps that are holding it up (remember 7 stocks represent 20% of the Nasdaq). When those big-caps fall, not only will these be the ones to short, but the market will be giving up and longs will need to be taken in.
The second thing I see that is starting to bother me is that the quality of new longs are starting to fall. Not only are few charts setup for potential huge gains (max green BOP, huge accumulation, and a long base) but the few very pretty charts that do setup do not do well at all. DAR is the most recent really nice chart that was setup for at least a decent gain. Instead, nothing. It is still a hold but the October breakout with how flat that base was should have NEVER have failed. Very disappointing knowing how many perfect/near perfect charts that have failed the past year. It has been a minefield. This is probably indicative of the bull market being in its fifth year off the 2002 lows.
The third and final thing that I see that is starting to bother me is that the buy GOOG, RIMM, AAPL, and BIDU crowd is growing. These stocks used to be shunned as too expensive. But recently I have noticed in the message boards, chat rooms, and CNBC that all dips are being touted as places to buy. Now, I know, it is not out of control yet and that the crowd is still relatively skittish with the put/call at .85. But with the rest of the market not acting well and many stocks falling, most people are getting used to seeing these leaders rally and rally. This is starting to make most people believe that the only way to make money buying stocks by buying the “for-sure” (nothing is ever for-sure) big-cap growth momentum expensive stocks. This game will eventually come to an end and when it does it will be good for us.
But, even though this stuff is starting to bother me–the new lows to new highs is really bugging me–it doesn’t matter to the actual market. The actual market is still trending up and stocks like ASTI (up 8%) and STRN (up 3.4%), which were both new longs, are proof that the long side is still the right side. I want to remind you also that as long as the trend of the market is up, the long side is the right side.
However, knowing that there are more new lows to new highs everyday, there is no doubt that being short is also the right play. When you see some of my shorts, you can see that the ones that have worked out like FAF (down 30%) and COH (down 20%) work very well very quickly. That is the great thing about shorts. As you can see with the ones that have worked along with the ones I label “nasty” in the forums section of my sells/watchlist, when shorts decide to breakdown they breakdown. And if you haven’t noticed it never happens RIGHT AT THE TOP. It almost ALWAYS happens at LEAST five months AFTER the top. If you haven’t noticed that pattern yet in my charts, dang it, you need to start paying attention. This proves that top calling is not needed to both make a ton of money on the long side and a ton of money on the short side. You just need patience and the discipline to do the hard work everyday. If you do that, you will destroy the average returns the stock market produces.
Aloha and I will see you in the chat room! Keep your head up and your watchlist updated. Don’t fall asleep at this point in the game. Anything can happen here. Anything is possible. Aloha!
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