BSC Blowup Proves A Chronic Emailer Wrong And, Once Again, Proves The Power Of CANSLIM; Stock Market Indexes Selloff On Mixed Volume But Hold Recent Lows
March 15, 2008 | Leave a Comment
Today was another day in the stock market that has just gone to prove that cash is in fact king. When you try to play a stock market with a heavy hand or even on margin in an environment like this you either have a serious illness or you just have never taken the time to study history and to have learned that the smartest thing to do is NOTHING. A stock market that is this volatile that has THIS MANY BLOWUP is definitely not a stock market you want to be messing with.
I am simply STUNNED! by the number of emails I have received from RM readers that tell me I don’t know what I am doing because I am not buying the bargain of BSC the past five days in a row. First off, the fact that ANYONE in their right mind is buying ANY stock below the 50 and 200 day moving average is pure INSANITY! These foolish investors think they are buying something that is giving them “a once in a lifetime opportunity.” Folks, that once in a lifetime opportunity only comes along once for these guys because they are ignorant of history.
If they have would have taken just a few moments out of their life to have studied the greatest winners of all-time they would have seen that the same patterns show up over-and-over-and-over. I simply do not know how many times you can see a cup with handle breakout from a fundamentally sound company in a bull market in every year, no matter if it is 1880 or 2008, and see those gains that they produce AFTER they are above those lines and say “no, you know, I am going to get this bargain here.”
Stocks Selloff On Higher Volume, Helping Send Some Indexes To New 52-Week Closing Lows
March 7, 2008 | Leave a Comment
Stocks sold off yet again but this time it did so on higher volume which is helping make my point that selling can start off slowly and pickup as it sells off. If you look at the downtrend since last February, you can see that this is the case now as it has been in the past with other market selloffs.
The good news, today, is that, like most sessions recently, the market staged a very volatile and powerful reversal. This time it was to the bull side and it was needed for the trapped longs as stocks looked like they were going to put in another very bearish day of trading.
The past two days has the feeling of a market that is ready to start its downtrend, once again. This would be the third leg down, since the top in November. And just like when the market topped, there are still way too many people that are looking to buy stocks here. If more people were not looking for a bottom, we could look at this selloff as a bullish situation as it would get us one step closer to a real bottom where we can get HOT charts again. Too bad we don’t have anything new and fresh setting up out there. Instead it is the same mess everywhere, and when that is taken with all the “dumb” money looking for a bottom, you have a market that could get very ugly.
And very ugly is not what people are looking for. Now, I know the data we are receiving out there is very bearish and I do know that we have had a 24% pullback in the Nasdaq. However, that simply is not going to cut it right now. Like I have said, too many people are looking for a bottom, and some very ignorant (who think they are very smart) people are starting to make some bold statements.
Will This Oversold Bounce Hold? Depends On Your Time Frame; Day One Of Rally Attempt
November 28, 2007 | 1 Comment
Stocks put in quite an impressive oversold rally today that had many people talking of a bottom. However, is this a real bottom or just an oversold rally that will lead to another selloff? First, it pays to look at the sentiment indicators to see if we had any fear out there. If we did, then we probably put in a bottom. However, if we did not see any fear in the market the past two days then we probably have not made a bottom and instead have made just a short-term oversold bounce.
I know we keep going over these points, but when it comes to trying to find a “REAL” market bottom, it is very important to follow these as they almost always coincide with a bottom. But the put/call ratio is the first one I look at and when I look at it I see an index that fell yesterday during the selloff from .89 on Friday to .88 on Monday. So after making new lows for the month, the crowd was less bearish and making less bearish bets on the market. So there is no fear that. And confirming that, the put/call ratio fell to .83 on today’s rally.
Then there is the VIX. Every single index made a lower low in November compared to their first low, however the VIX did not make a higher high. The VIX did not even break 30 on this most recent decline in the stock market. On top of that, the VIX has already fallen 10% today back to 26.28. The VIX is an excellent index when it comes to judging fear and it is obvious that despite the market hitting lower lows, the index confirms traders were not fearful this time down. I hate to tell you all this, but that is not bullish. Bottoms form when there is either complete apathy or a lot of fear. We do not have that and everywhere I turn on CNBC and everything I read at realmoney.com says to buy this “bottom.”
Selloff Continues As Bottom Callers Continue To Look Foolish; Adding/Establishing Short Positions In The Stock Markets Former Leaders
November 26, 2007 | Leave a Comment
The selling we saw on Wednesday continued today, after a slight one day oversold bounce. The bounce we had on Friday was on a half day and was on no volume so obviously the selling today can’t be too surprising to trend followers as it was very clear the low volume rally would probably not hold. And it definitely did not as some indexes hit new 52-week lows like the Russell 2000. The index that led us up from 2002 is now leading us down as we continue to selloff. This index is now almost 15% off its highs for the year and the major indexes are off between 10% and 11% officially putting us back in a correction mode.
While the trend is down and I went over everything I could think of about the current market during the long weekend, I still have found some very important key technical data that says that we are not done yet. First of all did anyone see the equity put/call ratio in IBD? The market fell between 1.8% and 2.6% yet fear fell as the put/call ratio went from .89 to .88 today. This clearly shows that there is no fear in this market.
