Strong Market Has Many Amateur Investors Confused; There Are Way Too Many Bullish Charts For Us To Breakdown

May 29, 2008

Some people are making this way harder than it is when it comes to making money. I make it very clear when I am going very long and when I am only buying a few to a hundred shares of something. A newbie will not know this but anyone with at least a few months will know that. So when you see that there are so many longs tonight don’t get too excited thinking that this market is going to be super bullish.

It is what it is. A low volume rally. But this low volume rally is loaded with short sellers, via the NYSE short interest constantly hitting all-time highs now at 14.27. So as long as the short sellers jump in the market and people continue to deny the rally–bulls fell to 37% from 50% in this week’s investors intelligence poll.

I have heard some actually say “I thought we were in a correction.” Of course we were. We had a SIXTH DAY OF DISTRIBUTION IN TWO OR MORE OF THE MAJOR MARKET INDEXES I believe when 5/21’s selling hit the market. History has PROVEN that most markets come under pressure when this happens. However, THIS IS A LOW VOLUME MARKET AND ANYTHING UNDER THE 50 DMA MUST OBVIOUSLY BE TAKEN WITH CAUTION. EVEN THIS RALLY.

Those that say “don’t buy this rally” are crazy because the charts EVERYWHERE are telling us that they want to continue to rally for longer than one day. As long as there are this many ROUND charts moving up and breaking out of key resistance with so many technology stocks now hitting new highs, there is no way I can get LONG-TERM or INTERMEDIATE term bearish. The charts are not that ugly. It is that simple.

This is day three of a an attempted rally and if we see the indexes rally 1.5% or higher with volume heavier than today’s volume, then that is a “historically high odds safe” signal to get back in the market. However, if nothing sets up PROPERLY, then OBVIOUSLY IT COULD FAIL. CHARTS ARE NOT THE END ALL OF ALL BUT WOULD YOU HAVE YOUR DOCTOR NOT USE AN XRAY OR A CAT SCAN ON YOU, IF YOU NEEDED IT? Of course not. Charts are necessary. However, 90% of you are still not reading them correctly.

Can you tell that the US Dollar has probably bottomed short term? Can you tell oil might have topped? With the euro (FXE) also? And do you see all those nice stocks like FUQI either breaking out or stocks like GXDX bouncing right off the 50 day moving average? Did you see the EPS and sales growth? HAVE YOU EVEN STUDIED ANY OF THE GREATEST STOCKS OF ALL-TIME by reading this site or any of the books listed on this site?

Some of you are definitely making this too hard and while the low VIX does stink and does prevent me from having 525% gains EVERYWHERE (and not just in MA from August 2006)–go to www.mauitrader.blogspot.com or www.investorsparadise.com to see what I typed the date of the purchase. Only a non-pro would have missed it, just like some of the recent winners.

This is not easy, but some of you are definitely making it harder than it ever should be. It is what it is. Long-term from the 2002 lows we are still in a bull market, intermediate-term from the November top is down, sub-intermediate from the March lows is up, short-term the trend is basically flat the past two weeks, and on the very-short term it is very bullish with a lot of hot charts showing up (though nothing is PERFECT). So when you are talking bullish or bearish, some of you are not discussing what freaking time frame you are on. The wild mix of trends, with the low volume on the rally, the extreme emotions in bulls and bears, the high amount of ETFs that take money away from stocks, a market with a VIX at ONLY 18, and the HORRIBLE regulations of Reg FD and Sarbanes-Oxley and you have a market that makes it very hard to make HUGE money anymore.

Yet, I still am doing very well. Subscribers to this site TELL ME THEY ARE DOING WELL. I DON’T KNOW ANYONE LOSING MONEY WITH ME IN THIS MARKET. So some of you who are emailing me and are not subscribers yet are complaining that I am not helping you make money must be crazy! LOL. Please, do not make this harder than it is: IT IS A LOW VOLUME RALLY BEING DRIVEN BY RABID SHORT-SELLING THAT HAS THE NYSE SHORT INTEREST RATIO AT ALL-TIME HIGHS. People continue to short the upticks, the stocks rise as the underlying demand soaks up the shares, the stocks tick higher, those shorts are forced to cover, and the next batch of losers come through. The trend is your friend. Don’t make it more difficult.

When we have a HUGE rally of 1.5% on HUGE volume on ALL the indexes, with the IBD indexes up over 2% AND I ALSO GET more stocks that have PERFECT setups, then we can scream from the ceilings to get long. But for now, I am having no problem finding FEED, then finding DGLY, then finding ISYS, and then finding STSI. Right now, none of them would be buys right here as their “moment” has passed but still the money is out there to be made. There are two V stocks up over 30%. One I did not go long: V. And one I went very long: VISN up 52% with me having sold 20% at the top. This market is NOT great but it DEFINITELY is not as hard as a LOT of you are telling me it is.

I am going out to Sansei’s tonight to celebrate the fact that my accounts are up over 20% overall since the March lows (the Nassy is up 15% also). Still do not kill yourself if you do not have any gains. As long as you are doing as well as the top 5% of all growth mutual funds, you DEFINITELY are still in the game and can KILL the market. There is plenty of time in 2008 left to make a lot of money.

On the short term, with the put/call below the .80, we might be getting a little too-bullish on the VERY VERY short-term. But overall this market definitely doesn’t make me want to CRY!! There are some nice charts out there still! I am going to enjoy my food and enjoy my night. I hope you have a great Friday. I need a break from all the riff-raff. I am going to enjoy the spoils from my riches before Barack Obama takes everything I have worked so hard to earn away from me.

Haven’t we learned that LOWER TAXES = HIGHER INCOME TO THE GOVERNMENT? I guess not. Hopefully, my fears, are not warranted.

This market is not great but in no way does it suck either. I have given everyone a LOT of chances to make some good money and more and more continue to appear every day. But remember the longer we go, the higher the odds of failure are. Also remember to take profits on the way up: 20%, 50%, 75%, 100%, 200%, etc…. This market still is not in a raging bull mode and it is still smart to take 20% off when you are up 50% or have a HUGE up day over 20% (or even 15%).

YUMMY SANSEI’s!!!!!! It has been too long. I love my sushi!!! and how about those LAKERS!!!!!!!!!!!!!!!!!

Posted by Joshua Hayes | Filed Under Market Commentary