Stocks Spend A Slow Choppy Session Moving Slightly Higher On Mixed Volume
January 29, 2008
Stocks spent most of the day in a very boring triangular range most of the day before moving higher in a very V-shape manner. The gains, however, were not built on the back of heavy institutional buyers. They were instead bid higher by the retail crowd which shows that the big funds still show no interest what-so-ever in getting long ahead of the Fed. With volume below the 50 day volume average the past two days it is clear that Wall Street is on pause waiting for the rate cuts.
There is not much to talk about today, since nothing happened (even the put/call didn’t change: .85) today. But there is something very interesting that I read in the Big Picture in IBD that I did not previously hear about today (not sure why).
I see that the Fed lowered rates on 1/22 after the global selloff that happened the day before. However, that selloff was exacerbated due to a rogue trader at Societe Generale who lost $7 billion in France’s largest trading scandal ever. The Fed cut the rate by 75 basis points without knowing this. This came out on Thursday but since I normally don’t pay heavy attention to the Fed news I did miss this. But I think it is a big deal because like I said yesterday the Fed funds futures are predicting a 50 basis point cut with a lesser chance on 25 basis points. What happens if the Fed doesn’t cut?
This is what I have been thinking about and when I combine it with a lower volume rally that we have seen the past two days it appears that we could be setting up for a sell the news situation. The lack of hot charts out there in my scans continue to enforce the idea that the low volume rally will fail. However, when I say it will fail, I could be off by a few weeks.
I have never denied this bear market rally and one of my biggest and best looking longs (FFH) is doing very well making a bad day due to FSLR and PCP a not-so-bad day. Obviously if I lost a good amount of money in FSLR and PCP but am not too upset about it FFH must be a bit bigger than a small buy. However, it is not a CANSLIM stock, so I can not recommend you guys buy it. But obviously it is priced to my liking. 
Anyways, once again, I think, if the rally continues to move on after the Fed rate cuts that this will ultimately lead to better short entries and will suck all of the last hopeful bulls and last holdouts that did not buy stocks the entire uptrend. Why didn’t they buy stocks? Because, silly, the media constantly told them how bad it was. Now that Obama is going to be the media darling, some people feel hopeful and with the media constantly talking about the economy–now that we are CLEARLY winning in Iraq–people are very focused on it. And after seeing a five year bull market it looks almost certain that in the long run stocks will move higher. Yes, I can still pretend like I am the dumb money; It isn’t hard since I am dumb. But the fact the rally lasted so long, there has been a deep pullback offering a lot of great “discounts” to investors who believe in the promise of change.
If by change they mean higher taxes then Obama sure is a leader of change!
What the politicians should be the leader of is “get the hell out of the way.” Too bad we will never get that. Instead we get MEANINGLESS rebate checks. How about making sure my income tax doesn’t go higher so I can continue to be motivated to work and trade stocks. All they want to do when any downtrend occur is get in the way and “fix” it. The best thing to do, of course, is to stand to the side and let the cycle do what it has to do. Go get the bad guys like Refco, Enron, Adelphia, Worldcom, and many many others, but don’t enact stupid burdensome regulations like Reg FD and Sarbanes Oxley. Two KILLERS of our stock market. This is why London has more IPOs than the USA: Sarbanes Oxley. This is why we have more gap down and gap ups in our charts to such EXTREME degrees: Regulation FD. It should be Regulation BS.
Oh well, anyways, no matter what the Fed does, I think it is either going to lead to a vicious selloff or a follow-through day. And if we follow-through I think it will be a super suck-in. Unless hot charts show up (which they should already be doing if we were to have one) there is no way this rally can last. All new rallies (like 2003 with GRMN SSYS SINA SOHU NTES ERES and GPRO) have these fresh new stocks. The fresh new stocks right now are Medical stocks as they make up 8 of the top 20 industry groups out of the 197 IBD follows. What else is new up the list? Agricultural has made it back up there, Oil is back, and bear market favorites Telecom and Funeral Services are there. Rotations take a long time in the market and if we are rotating from the old leaders to the new leaders it is going to take some time. Medical stocks making up this many industry groups in the list is not a bullish setup for the market.
Folks, don’t forget that I am willing to become a bull if things change. If we get a follow-through day and all of a sudden a month later we have HOT perfect round bases with proper volume characteristics with huge earnings growth I will go long the breakouts and bounces off the 50 day moving average. But like my last column on RealMoney shows with the Nasdaq: the stock market does not bottom after a long selloff on heavy distribution. When you have that heavy distribution without an intraday washout on HUGE volume, you can not have a bottom. Most bottoms are made after a heavy volume rally is followed by a fall on very low volume to either new lows or not that is followed by a bounce on huge volume.
This will normally have the Acc/Dis ratings on the Nasdaq and IBD 100/85-85 index at an A, A-, or B+. But when all the indexes have D- or E, it is not the time to be buying stocks. I don’t care what Kass, Cramer, or Marcin says. NONE of them have any clue how to trade like an individual investor. They are hedge fund rats!
Aloha and I will see you in the chat room!!
Related posts:
Comments
3 Comments »
Here it is!!! Exactly what I was prepared to happen. Damn. My shorts are hurting but this is why I AM AT AROUND 50% CASH FOR THE FIRST TIME SINCE 2002. THE SHORT SIDE AND LONG SIDE ARE BOTH VERY DIFFICULT RIGHT NOW. TRUST ME THE SHORT SIDE WILL WORK OUT AGAIN. I NEED YOU ALL!!!!!! TO STUDY THE 2000 TOP AND EVENTUAL BREAKDOWN. THE TOP CAME IN MARCH AND THE REAL BREAKDOWN CAME IN SEPTEMER. THAT WAS SIX MONTHS AFTER THE HIGHS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! THIS IS JUST LIKE 2000 AND 2001 WHEN THE FED WAS CUTTING. THE MARKETS ROSE AND GAVE FOLLOW THROUGH DAYS THAT ALL FAILED. BUT DURING THAT TIME WE GOT SOME GREAT LONGS LIKE FFH. SO IF MORE FFH CHARTS SHOW UP, WE GOT TO GET THEM IF WE CAN.
YES!!!!!!! Fail rally fail! Now THIS is what I EXPECTED TO HAPPEN. This market is playing itself out just like 2000-2002.
Being prepared for the rally was smart but if we had one it would have been disappointing. This is more how the market should be acting. Being heavily long is still wrong.
Thank God this is failing. A follow-through today would have done more damage than not as it would have tricked a lot of people back into the market, even though they can’t tell the charts SUCK!!!
JoshuaHayes: NEWBIES CAN NOT TALK FOR 30 DAYS
JoshuaHayes: NEW RULE IS NOW IMPLEMENTED
JoshuaHayes: NO MORE NEWBIES CAN TALK
JoshuaHayes: NEW RULE IS NOW IN PLACE
JoshuaHayes: I WANT THIS POSTED AT THE ENTRANE
JoshuaHayes: WHEN PEOPLE COME IN THE CHAT ROOM
JoshuaHayes: IF THEY ARE BRAND NEW THEY CAN NOT TALK
JoshuaHayes: TOO MANY FUCKING MORONS AND BABIES
JoshuaHayes: AND THEY GET INSULTED WHEN A STOCK THEY LOVE
JoshuaHayes: AND TRUST ME…..HE LOVES ETFC
JoshuaHayes: ALREADY HEARD IT BEFORE
JoshuaHayes: IN A PRIVATE MESSAGE
JoshuaHayes: SO FUCK ALL TTHESE DUMB FUCKING NEWBIES
JoshuaHayes: WITH UNDER A YEAR IN THE MARKET
JoshuaHayes: THEY ARE TOO FUCKING STUPID TO MAKE MONEY THE PROFESSIONAL WAY
JoshuaHayes: so you all can now thank Gerard and WillPS
JoshuaHayes: for being the two dumb fucks of the chat room that have caused this rule to go in effect
JoshuaHayes: i need more professionals here
JoshuaHayes: or wanna-be-pros
JoshuaHayes: not fucking get rich quick babies that go to options and that see big moves AFTER THE FACT
JoshuaHayes: these people i dont want here
JoshuaHayes: as they always show up at the end fo bull markets
JoshuaHayes: mauijim was the indicators
JoshuaHayes: he showed up in February
JoshuaHayes: and that was the key a top was coming
JoshuaHayes: since MauiJim uqite a few morons getting rich have shown up all failed!!!!! but where am I???????
JoshuaHayes: BHCO where is his 10 steps?
JoshuaHayes: WillPS where is his “i told you so emails” they stopped coming?
JoshuaHayes: MauiJim get rich in one month…gone
JoshuaHayes: Air23 who was mad at me for not telling hiim THE BEST ONE and telling him when to sell
JoshuaHayes: now this fucking tool Gerard