Stock Market Farts; Cash is King
September 22, 2008 | 2 Comments
Today certainly proves why cash is king and why it will continue to be king until we get a new bull market. For those who jumped on the bandwagon on Friday are now under water and are hurting from today’s sell off. This kind of trading, this type of market should be avoided by all those who do not have at least 5 years worth of successful trading under their belt. It is useless to try to day trade to only burn and churn your account. The government can not help and will not be able to curb this mess, it will only prolong it.
Cash is king, cash is king. Patience is the number one trait everyone must exercise, our members are surviving this market because they are in cash. We are avoiding this mess and making some gains and prepared for a new bull market. It may be months or years away but we are prepared for a new bull market. How can you be prepared when you are churning and burning your account in oblivion.
Enjoy
Big Cap Technology Stocks Hold Back Stock Gains
July 19, 2008 | Leave a Comment
After the bell Thursday MSFT and GOOG missed expectations sending both stocks lower after hours. Come Friday little had changed as these two gigantic technology stocks weighed heavily on the NASDAQ. AAPL joined the fun and ended lower on slightly higher volume. Options expiry failed to inspire volume to rise, it certainly gave the impression traders were simply not around for the trading session. Stocks finished off their lows on lower trade and was a quiet day overall for the entire market.
At Big Wave Trading, we feel this market is not our new bull market. With that said, we are finding some stocks that are setting up nicely and starting to present opportunities to make money. In the grand scheme of things we aren’t in an environment where we are going to grab our 1000%+ winners. Therefore, we are keeping our cash levels high and, new trades small, taking profits quickly, and (THE MOST IMPORTANT THING) cutting our losses (keeping them small).
We continue to see market pundits believe we have bottomed in financials. However, this was stated back in September ‘07, Jan. ‘08, March ‘08, and again now. When will we bottom? Here at Big Wave Trading we only care when we know our new bull market is here. At the moment the VIX, VXN, NH to NL ratio, and lack of a follow through day tell us we are not there yet. The real big tell is that we are not seeing as many stocks come through our market scan as we would normally see in a bull market. Stocks simply aren’t ready to make a giant leap forward. Until they do, we’ll be cash heavy read to pounce on the new opportunities.
Gamblers Need Not Apply
July 19, 2008 | Leave a Comment
I am in the belief that we have not seen our ultimate lows in the market. We have not seen the type of capitulation selling you typically see at the market’s lows. VIX and VXN continue to show the lack of fear in the market to show a real turn in market direction. If you are a gambler, step away from the market. This market is one for the birds and will present little (slim odds) upside potential. Gamblers will look to place abnormal risky bets using far too much capital placing them at risk to be wiped out. When the market is presenting such small odds for winning trades it is best you step aside and let it self work out.
The worse trait to have as a trader/investor is the gambler mentality. All the greatest speculators in the world knew how to cut their losses and avoid trendless/bear markets. Our current bear market is one that should be avoided all together. IBD research has shown that Monster Stock gains arrive when we are at the beginning of a new bull market. Why not use this research to our advantage and get a large cash position. We can still find some stocks that are setting up nicely in a bear market but our odds are not as great as if it were a bull. The key is to take profits a bit more quickly in bear markets and make sure you keep your losses small! Not only will you see gains in your trading but you’ll be well capitalized for the next Bull Market!
Financials Lead Stocks During Choppy Intraday Action, Crude Breaks Support to help Boost Stocks
July 18, 2008 | 2 Comments
Stocks were on a wild ride during Thursday’s action. Stocks had a terrible time gaining traction throughout much of the day. It wasn’t until Crude Oil prices collapsed under its own weight, falling below a key support area of $130 a barrel. This helped stocks rocket to session highs as volumed surged with the move. Volume was tracking higher from the opening gate showing that the buying has been picking up. However, our beaten up Financials has led this move off the bottom, as I have mentioned in yesterday’s piece is not the group you want leading you out of a bottom.As I was told many times when I was a young lad: “its not the situation you are presented with in which you are judged its what you do with it that will be.” At the moment, with Financials leading this market is tough to get excited knowing when beaten up sectors lead the market it usually spells disaster for the rally attempt. Cash, by far continues to be king. Preservation of capital is an important, is the most important thing we must execute during bear markets. We need the ability to put cash to work in hot charts in a new bull market, without cash we will miss stocks that race 1000% or higher.
I am sure we’ll continue to see market pundits call the “bottom” here and let everyone know that it is “ok” to buy financials. We heard the same story back in March after the Bear Stearns debacle. How did that call back in March turn out? In fact, its no different this time than last. It will take some time, if not years to repair the damage the “unethical” lending/borrowing practices that were executed by brokers and individuals. Patience is the key in this type of a market and without it we’ll lose our precious capital.
Markets Race Higher led by Financials and Airlines
July 16, 2008 | 4 Comments
Wells Fargo gave a boost to the stock market with positive news stemming from its earnings release. Stocks continued to build upon gains throughout the day. Crude Oil prices sank for the second day in a row, capping a 10% decline in two days to help stocks push higher. Although price action was very positive volume was not. Volume tracked lower all day long and finally closed lower on the day. Day 2 of the most recent rally attempt was lead by financials and airlines. The two most beaten up sectors were today’s leaders, not exactly the leaders you want. We’ll have to wait and see how this rally attempt progresses, but at this point we need confirmation.Over the past few weeks you have read Joshua explain the need to get into cash and exhibit patience with this market. Many will try and bottom feed this market and lose their shirt. New Bull Market do not begin with the old leaders rallying and leading a rebound. Real fresh Bull Market depend on NEW leaders not old beaten up prior leaders. Financials and airlines have been beaten down to the point of bankruptcy. What we need are fresh new companies with new products and services that will spark the large amounts of cash on the sidelines to flood the market. At this point, we have beaten up, old leaders trying to make a comeback.
I am not about to get too excited over this attempt at a rally, I need to see more positive action from the markets.
Thoughts on VIX and VXN
July 14, 2008 | Leave a Comment
I just wrote my daily commentary over at my blog and included a blurb about the VIX and VXN. Here it is:
“VIX and VXN continue to be “low.” I had the opportunity to speak with an individual who had graciously share that some large institution was handling a large quantity of employee options. There is a debate if the VIX/VXN have sufficiently signal a bottom. Afterall, both have moved almost 100% off their May lows wouldn’t that show enough fear? One explanation that was given to me was the large, LARGE amount of employee options that had hit the market forcing this large institution to sell volitility (vol). What this creates, a low VIX and VXN. Therefore, if this large institution was selling vol than VIX and VXN have moved sufficiently because the indexes are “artificially” low. But, in my experience if a financial instrument are “artificially” low or high they tend to OVER correct on the other side. In this case, VIX and VXN aren’t sufficiently pricing in fear and will overshoot at some point. The bottom line, we haven’t seen our ultimate lows leading up to a new bull market and we should continue to wait patiently on the sidelines.”
I think it is important here to note that when anything is held down artificially it will over correct to the other side.
Sloppy Markets Lure Sloppy Traders
July 11, 2008 | Leave a Comment
Today is another PRIME example of how bear markets with low VIXs and terrible NH/NL work. This market continues to be plagued by those who love to be a hero and catch the ultimate bottom. So far, how has it worked out for everyone? Financials are a complete disaster, years away from recovering and we have Crude Oil prices at all time highs. The Global Economy is slowing, inflation at home and abroad is not slowing down and better yet look at all the charts of major indexes from around the globe. The charts are telling us there is something serious afoot globally. Our global economy is not what everyone thinks. Our markets are in the process of determining that at the moment. Let the charts guide you and they are screaming to KEEP OUT.
Inactivity is your best friend, better yet a vacation is calling everyone’s name.
Main Street Fears Lead to Wall Street Profits
May 7, 2008 | Leave a Comment
According to a new CNN poll 79% of Americans when asked ” Is the US in a recession” said yes! Main Street has given into the media constant hype about high oil prices and how BAD the US economy is. Most on Main Street form opinions not on their own situation but what they think others are. Concern for your neighbor is ok, but does it actually reflect the current environment. In these types of situations, Main Street is wrong and does not reflect the actual reality but more so perceived reality.
As Crude Oil hits another all time high, Main Street will be reminded HOW BAD the economy is and how bad the Bush adminstration is. In reality, we have not seen back to back negative GDP growth and we have even seen negative GDP growth AT ALL. Even today, we are seeing selling only on the NASDAQ with higher volume. With that said, it will only be the second day of distribution the index has seen in recent weeks. It takes 5 to 6 days worth of distribution to knock down a market.
Again, no panicing allowed! Turn off the mainstreet media, go enjoy life!
Trading Scared and with Emotions Burns Through your Capital
April 25, 2008 | Leave a Comment
In the past few days we’ve seen some nice runs in stocks and some stocks that have pulled back after gains. An example would be MTL, which we are long for those who are Big Wave Traders. Yesterday the stock was being hammered in the AM. A few members were a big frightened and had no clue what to do. Since we are not day traders it makes no sense for us to be emotional about moves intra-day. By the end of the day, MTL was down 8% but volume wasn’t overwhelming and BOP actually increased. The stock is maintaining its uptrend and has not broken down on large volume through its 50dma or 200dma. We do not panic, Jesse Livermore stated “More money is made waiting on stocks.”
This market is setting up for a big upside run. We do not want to be cutting the stocks that are making moves and rotating into laggards. Stick with your winners!
Money is Made in the Wating Game
April 12, 2008 | Leave a Comment
Stocks are clearly not ready to break to the upside, nor downside. Friday’s painful % decline was not all that bad. GE’s dismal display of earnings had many on the street shaken. Although a GIANT, GE is not a leader in this market and we should be caring about leadership not who is the biggest. GE’s volume accounted for more than 1/4 of the NYSE volume, without NYSE volume would have been pathetic let alone down.
Thursday’s action was definitely a positive sign for the permabull/goldilocks crowd, volume surged while we had price gains. However, Friday’s action is showing that this market isn’t quite ready to break up/down. Jesse Livermore always stated that more money was made by waiting rather than doing. CASH continues to be KING, throwing a large amount of dollars at this market will only get your account to shrink.
We can certainly be taking small positions, we have been here at Big Wave Trading. However, we are keeping a lot of cash on hand so we can be ready for the next big bull run.
