I had a completely different approach in mind when I first wanted to write this but I figure I will stick with the facts. The facts are as quickly as this market looked like good times could be returning it in fact was possibly throwing us false “all clear” signal. Now while I never fully bought into this rally due to the volume, I still held hope that the rotation that I started to see into technology stocks would continue. Now I am beginning to wonder if that is what is happening or if they are making it appear that this was the case just to shut the door in our face.

At the end of last week things were looking very strong for the stock market, despite the low volume, as a lot of stocks that were in our portfolios were producing some large gains. But without ANY warning or clear reversal signal, the stocks started pulling back slowly getting rid of all the gains. The lucky part is that we did sell SOME as they pulled back since volume was higher. But the stocks pulling back on low volume and green BOP gave us no reason to sell. Since stocks that move up 20% in two weeks should always be held for at least eight-weeks it seemed stupid to sell anything pulling back. However, now it appears we should have taken more gains. This is the one time not taking profits quickly hurt us. The low volume was the tell and I should understand that next time as this is nto the first time I have witnessed this action.

If volume would have been much higher on the Nasdaq and NYSE then I am almost for sure some of the stocks we lost a lot of our profits on would be flying. But low volume rallies are always dangerous if for no other reason that what happened the past four days in the market. The nasty action is most noticeable in the DJIA as you can see it trying to breakout through the 200 day moving average, failing, and then breaking down through the 50 day moving average. This gave it a 3.9% decline on the week which was by far the worst of the indexes.

However, the Nassy fell 3.3%, the 500 fell 3.5%, the NYSE fell 3%, and the IBD 100 did not show any positive divergence with a 3.4% loss. There is no way to spin ANY of this. Last week was a very bad week, considering the week before the market appeared to be ready to give us a bullish rotation into leading tech, retail, and some homebuilding stocks. Too bad that was was killed this week.

The big news of the day was the BUD takeover bid that bid the stock up 8% but overall the biggest economic news came from the fact that the backlog of unsold homes hit a 23 year high! This is just shocking and if you think about how much equity exist due to the housing bubble it should come as no surprise that money is not moving anywhere. Things definitely are not good out there. Especially with oil up 1.38 to 132.19. Ridiculous. Over here on the island of Lana’i, gash is already $5.03 a gallon for unleaded. NICE!

This cost of gas has to be the reason the market is trying to fall apart. It makes complete sense as oil takes off the stock market dips. But oddly enough, unlike most oil rallies, oil stocks for the first time did not come along and in fact started showing signs of wanting to pullback. Combine that with everyone talking about $150 and $200 oil and hopefully this speculative fervor has reached its boiling point. However, as long as this ONCE great nation wakes up and starts drilling in ANWR and the OCS, I doubt we will see oil below $100 EVER!!! again.

Getting back to the market, I am sure some of this is the reason we are seeing so many distribution days in the market. Since I like to think the opposite of everyone on wall and broad it appears to me that some had hoped oil was going to top along with the ags and were ready for a tech rally. The fact that has not happened is a big reason we are all giving up. Now, I sincerely hope I am wrong about all of this. In fact, for my accounts sake, I pray I am wrong. But 6 distribution days in the IBD 100, NYSE, and the DJIA is a major warning. You do not get this many distro days WITHOUT ANY accumulation days in a healthy market. When was our last accumulation day? How about March 20th since the NYSE actually had a higher day with above average volume. Isn’t that unbelievable? I have to be honest. I have been around a long time (considering that THIS IS ALL I DO besides surfing) and I can not remember the last time I have ever seen this.

In hindsight, it just seems impossible to actually think this will turn into an uptrend. If this was going to be a real rally, based on history, we would have already had 3 to 5 days of higher days with higher volume within the first FEW WEEKS! Here we are a few MONTHS into this LAME rally and we have NOTHING. This is not good folks and this is the reason my potentially bullish stance is going back to a negative nanny.

It is very hard for me to be either bullish or bearish in a market that trades on low volume and goes nowhere and therefore I will stick by that bias about not making a bullish or bearish commitment here as I will need to see volume enter this market above or below the 50 day volume average on a more consistent basis. Some have asked me about the volume above average in the Nassy. Now while I must say this was very good at first, it has now turned into distribution above the 200 DMA toward the 50 DMA this week. Therefore, you have the same situation we have when we just take a look at the index.A muddled picture.

From the March lows, both indexes are technically in uptrends. But last week everything broke those uptrends. So it is going to be real important to see how the market reacts around this are to determine if more selling or some buying is going to come in.

Considering that I am a contrarian and believe we should be buying when everyone is selling, I am not sure everyone is selling right now and therefore it seems that this is just a mixed picture. There is simply no other way to play it. I have proven in these commentaries that I know when to be bullish in bull markets and bearish in bear markets. But this market is about as mixed as it gets. As soon as a stock sells off it starts moving higher, as soon as it rallies it starts selling off. Do you know what that tells me? DO NOTHING!

It is time to once again go back to raising cash. If your stock is falling on higher volume, and you have some gains in the stock, make sure you do take some. If your stock if falling on lower volume and you have big gains already I would hold on to it and wait for a support area to take a stand. If that does not hold up, you then may want to take some off.

But I want to warn you about taking profits quickly in stocks that move up 50% in one month. Sometimes, like now, with the low volume, that will be all you will get. But if any of you will just take the freaking time to spend a few hours on ALL OF MY PAST BIG WINNERS THAT I HAVE POSTED FOR YOU you will eventually understand that to make the big money you have to hold the stocks on the way up in a bullish market. All of you LAZY people that are NOT taking the time to study ALL OF MY PAST BIG WINNERS and current longs that are doing very well, you will never learn how to find the best stocks that make the biggest money in the shortest amount of time.

I hate daytrading, I can NOT stand wasting my day watching flashing quotes all day. Maybe some of you would be 100000x better off by STOP watching the longs that I go long intraday. If you want to daytrade, go for it. Just make sure it isn’t the stocks that I am going long. There is NOT ONE SINGLE stock that I enter that I plan on selling before the day is over. What am I? 12 years old. This is a game for the lame that have NO CLUE how the biggest winning stocks are created. If you want to daytrade the index futures go for it, if you want to trade stocks don’t be a donkey and don’t touch my positions.

The biggest problem I have with the rally is that the worst groups of the last leg down are the best groups in the current rally. Not only are the same commodity stocks and past weak stocks leading they are doing so (most of them) on lower volume than on the selloff. That is negative.

Still it is hard to judge anything without volume. Which is why when I write all of this I just wonder why am I even doing it. The low volume market is a market that most players should be out of without a doubt. But somehow us traders have some problem and think that everyday there is a money making opportunity or a reason to do something. The truth is that is pure BS. About 3 or 4 times a year you get a perfect setup and even then I am learning 1/2 fail. This low volume market is making a lot of us overanalyze the whole thing when we should just take a step back and wait for volume.

Sometimes I am not even sure what the heck I am writing about because I feel like I have talked and written about it too much. Now I know how people go crazy. So from here on out I am going to lay it out point blank how this market is and what we should do.

Back when we started selling off, I was on top of it, we went short, and scored some gains. However, not a lot of the big gains came from the best setups which caused me (but not my subscribers who beat me–WTG [I am not the jealous type-in fact i WANT you to beat me]) to underperform my normal downturn periods. This led to the January lows that with the heavy volume sent the market into neutral territory. During that time I expected another rollover but insted in March we got a tiny rally with plenty of good stocks moving. But the problem became clear quickly. The gains in the best patterns kept failing or not holding. THIS IS NOT how real bull markets start and was our first clue this was probably not going to last.

But I am a natural optomist and did believe this could turn bullish as long as the pent up money on the sidelines came back on the bull side to chase that RIDICULOUS 13.86 NYSE short-interest ratio. However, I was wrong and instead many of my best setups (which none were great but they were good) have ALL failed. So what do I do now? The same thing I always do.

Now, that I realize this stupid market is not going to cooperate as it has now destroyed every single last one of my potentially hot charts is to lock in some profits on ANY stock that took more than 5 weeks to gain 25%. If it took the stock that long get rid of half of it and put that money into a potential mover. Now if your stock is up 25% in two weeks, make sure you hold on to some but still the way this market is acting you better take 20% off. Also if any recent buys have lost the beauty of green BOP, are in a downtrend, or have broken below a recent base you need to sell some or all of it if it has completely broken the cut loss rule. If I buy a stock it is because it looks like it is going to blast off. If it don’t, then it has failed miserably and needs to be dumped.

I am one of these guys that KNOW it is STUPID to buy falling stocks as I lived through 2000-2002 and was involved in LTCM when I first started so I know as soon as I lose gains or rack up losses to get out so that I have more money to put to work when times are good. Right now, times are not good but you can GUARANTEE that they will be again. There will be more max green BOP stock, they will setup and they will be buyable. Some stocks to keep an eye on for potential entries at the 50 DMA include FLS, SD, SOL, CSIQ, MR, and TMRB. That is just a VERY tiny selection of some potential fundamentally sound stocks that are setting up.

Some that you should stay away from depstie the strong fundies include CHL DRYS DSX GNK OXY DIB GHM SNHY STD which are all starting to show some very negative short term action. This can not be good for now.

But still, how bad really is it with all this low volume? It isn’t. And this is my point, until really powerful BIG institutional money returns to this market it is basically a stock pickers market and since that is what I do best I will continue to try to do that. BUt I want everyone to remember, when the market is trending up 70-80% of what I go long will go up a lot and be very rewarding. However 20-30% will be crap and must be cut short. At the same time, in a sideways to bear market less than 50% of the stocks I take will work as a TON of false breakouts/bounces happen as market makers artificial create these points to trick people like us. However, if you remember to cut losses faster and take profits quicker in markets like this, you can still do very well.

For now, I advice everyone to stay low for now. Do not go long stocks unless the setup is perfect, the stock is in a group FLYING up the industry group charts, and is a top performing stock in its groups. Right now, the market is a little rocky and has taken care of our longs that were once showing us super solid gains not so nicely. So I suggest caution and once again, guess what? CASH IS KING. I suggest raising cash on anything that doesn’t work and unless it is perfect leave it alone. That is all I can leave you with.

My last words is I hope you all had a better Memorial Day than me. I came down with a severe MS attack that knocked me on my ass. In over…gosh I don’t know…I have never felt so tired. I could only surf (still surfed strong) for an hour but besides that slept for three days in a row including 15 hours on Saturday. I am not sure if that is normal but if anyone is a doctor and has some sugestions please send an email to the administrators at BigWaveTrading.net and they will get it to me. Thank you. ALOHA and hopefully this weekend is not as boring as last week. At least we have the basketball, hockey playoffs and MLB. Thank GOD for that!

Have a great week and great luck. Remember, be careful out there this week and DO NOT come out of the gates with a “get rich quick” mentality in this market.

No matter what, though, I will be locking in gains in a lot of stocks that initially have made big moves but have given so much back in a few short days that we must protect some gains just in case they become losses. So there will be a lot of selling tonight but if I am long a stock and it is still in an uptrend above the 50 day moving average there is no way I am going to sell it all.

Is this action disappointing? You better believe it is. Am I surprised? No. I have been telling you that there are no more perfect charts, have warned you about all the perfect charts turning into mediocre charts, and have been complaining about the low volume rally.

My only fault is having hope that a low volume rally could turn into a higher volume rally. I hope this is only a blip but, dang it, since the blip is happening right here after we started to get some nice gains it makes it pretty disappointing. I know I am bumming over today’s action. A lot of gains have slipped away and discipline that has allowed met to hold stocks for HUGE GAINS, unlike ANYONE I have ever read on the internet or have met, is also hurting me now as those gains are proving to be short lived.

Right now, things look depressing, but after going over my charts I will return with another in-depth market commentary. For now, I am bumming knowing that the short rally could be over. However, this could turn around tomorrow and we might be back up 1% on the Nassy, 2% on the IBD100, and 3% on the SOX. That is why you MUST remain neutral with your market opinions right now. Take each stock on a case by case level. That is what I will do tonight.

Today’s distribution day did come with most indexes losing 1.8% which was a nice chunk lower but the NYSE’s volume was below the 50 day volume average for the 33rd consecutive day. The Nasdaq’s volume was higher than the day before and above the 50 DVA but the volume on the index was still lower than 4/24 and 5/1’s rally on higher volume. The selling was heavy but nothing that smells of SERIOUS distribution. I will need to see further confirmation before I sell stocks that are still holding support. Especially when the majority show either intraday tails or low volume on the selling.

The selling seems to be the result of the weak financials and it is disappointing to see that CSCO just doesn’t have the influence it once used to on the overall market. Nope, what effects the market is oil and oil up another $1.69 to $123.53 is not what the doctor ordered and it is the virus that got this market sick. Even though oil stocks are leading this market higher, especially in the US Expl/Prod which were slightly lower but still had 32% of the stocks in the group hitting new highs and a total of 61 energy stocks hit a new 52-week high intraday. The other oilandgas stocks held firm also, with International integrators and drilling stocks having 22% and 20% of their group hit new 52-week highs. 28% of steel-producers also hit new 52-week highs so let’s not forget about that group either as it held up well in the middle of the selling.

If my math is right we have a few bullish developments during this pullback that make me feel a bit safer that not too much more downside pressure is in the cards. The put/call ratio rallied back to .93 which gets it ever closer to the 1.0 level which shows the crowd has gotten too bearish. The number of stocks hitting NEW 52-week highs beat the number of new lows by 142 to 130, which is an excellent development during a down day and not something I have see in a while. The last but-not-least item is the NYSE short-interest ratio which is just hitting another all-time high of 12.86. It almost takes 13 days to cover the 4% of the NYSE that is short and this kind of fuel that can be added to the fire, IF THE MUTUAL FUNDS WOULD JUST RETURN to buying stocks. That would be beyond nice.

However, until they show up, I will just be biding time taking the best trades I can in a market that is offering me very few to zero perfect charts that are loaded with huge accumulation and max green BOP with great fundamentals. A lot of leaders had a bad day–SOHU GFA GNK PRGO CTRP KWK CBD–but they all are holding there above very key support which makes me, for now, confident that we still have more room to run.

I am starting to nod off on my computer so I will see everyone in the chat room around the same time that I always show up. Aloha and great luck in this low volume to average volume market. ALOOOOHA!!

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!

Market Speculator

Today, however, that was minor compared to the SOX’s 4% powerful rally that saw shares of BRCM leap today on huge volume. I am starting to believe that what I COULD be seeing is a rotation from commodity stocks (which don’t appear to be done yet at all) into technology stocks. That can best be viewed by taking a look at your daily SOX chart for 2008. As you can see we have a ton of excellent price action to go along with all that support right in the 340 to 350 zone. The move in the SOX today gets it ever closer to being able to take back and claim its 200 DMA. Tech stocks led in 9900 and big-cap tech did well in 2003 also. However, since then it has been all commodities but if the parabolic runs I am seeing in POT MOS AGU FEED etc…I will continue to monitor those stocks for a blowoff top and watch Semi/Tech stocks for more breakouts or possible bottoms.

I HATE calling bottoms while a stock market is falling and I hate saying a stock has bottomed until after the fact it looks bottomed. When I look at the stocks in the Semi index, I can honestly say, that I am starting to get that “feel-good” feeling in my body where I think that we are just moments away from launching a big rally. However, anything can happen in this market and I promise you that INDEED ANYTHING CAN HAPPEN. EVEN THOUGH IT LOOKS LIKE this market is going to resolve itself to the upside via some tech stocks trying to regain a strong uptrend. But once again, though I feel good and it appears eventually the SOX can take off and run, anything can happen and that is why I am prepared for anything and everything. Up, down, sideways, or a halt. I have my game plan ready to go!!

Volume was higher on the Nasdaq today, like I said earlier, which does give me conviction the people that are active in this market (smart money) is buying stocks and they are not selling them which is indicated by the low volume on the pullbacks. Today, in IBD, I noticed that the NYSE volume was lighter. But on my Telechart it was heavier. Still with it being below average and just slightly higher or lower, it really doesn’t matter; it was below average and that is all we need to know–the big boys were still not actively investing their money.

Those that were invested are still focusing on the energy sector, with 16 of today’s 61 new 52-week highs coming from oilandgas. Other areas that are leading include metals/steel and chemicals with 7 and 5 new 52-week highs respectively. There were other groups that shined today like food (CALM and sd) stocks but overall those commodities simply do not excite me as their charts are showing multiple days of HEAVY distribution only to revers a once strong and great uptrend.

Some key market metrics that I saw today is that Investors Intelligence survey which came out showing that the bulls have retaken the lead with 39.1%kl to the bears 35.6%. This shows that the newsletter writers believe we have bottomed and from here are no longer extremely pessimistic according to survey. The put/call also fell a bit today on the rally to .87. The numbers being registered recently shows a market where more and more players are embracing the long side. This crowd is doing it by buying puts.

Also another important sentiment gauge, however, shows the exact opposite with the NYSE short-interst ratio which came in at yet another all-time high of 11.32. This means it now takes almost 11 1/2 days of average volume to cover all the shorts out there on the NYSE. That is a TON of added buying power. If the growth and value mutual funds that have been raising cash all of a sudden start putting that word out to buy stocks and they start accumulating them in bulk.

Overall, as you can see, it is still a mixed choppy and random DANGEROUS environment. Until we get more volume to the upside or downside (at this point I don’t care which one), there is no way I can go all-in on the long or short side. I have a bias to the bull side on a short-term and sub-intermediate term. But when it comes to long-term and intermediate, I feel like we have a LOT of backing and filling still yet to do.

But I do have some nice charts with two being DARN CLOSE to perfect charts. I assume if we are to blast off into another new powerful rally we are going to have to see more max green BOP filled charts show up for me to get real bullish here. For now, I will remain cautious and near 50% cash level. I have a little over 50% of my account long, after selling down one of my bigger (top 5 but not top 3) positions. I feel like the stocks I have a lot of are going to do really really well now as the remaining large positions are very sound, green, and show little selling. So, for now, I am completely happy with my holdings (50% long, 1% short, 49% cash).

Aloha and I will see you in the chat room, where I will probably be a little late, after having such a fun day at the Westin. It was nice to go back to the hotel I used to work around and see so many old friends. There is nothing!!! in life more important than friends and family. NOTHING! Remember that and life will always be enjoyable and meaningful. ALOOOOOHA, I will see you in the fun chat room, where I prove trading/investing in stocks can be both fun and VERY profitable (but sometimes…we lose too…BRKR happens…it will happen again…that is why we ALWAYS cut our losses).

Despite the losses, there was one bit of good news that can be taken away from this session and that is that volume was lower across the board. In fact, Friday’s volume was the lowest turnover of 2008 and shows that institutional investors who make up over 75% of the volume in the stock market were not active at all. Still, you can’t get too excited about low volume pullbacks when they come after low volume rallies.

We did have one heavy volume rally on 3/20 when the DJIA had its follow-through day. However, since then we have been left with nothing but low volume volatile-intraday sessions that have left us at the same point we were at right before the two bullish days on 1/22 and 1/23. This is not good as it is not normal to see a market have a FTD and then not put out any big winners that are working right away or have any follow-through days to the follow-through day.

And at this point, that is what I must have before I can believe it is safe to get very long again. I must have a lot more HOT and very green charts setting up in proper bases in CANSLIM quality longs and I must see more volume to the upside in the leading indexes. Without the very big price gains on much heavier volume, there is simply not enough support in the market to justify buying stocks up here.

Especially when the DJIA has a P/E ratio of 62.2. Can you imagine what the P/E ratio might be if the bank stocks that are in the DJIA come out with HUGE misses thus sending the DJIA P/E ratio up to 80. Considering I know investors that have told me they only buy a market with a P/E ratio of 5-10 on the DJIA and I see SO MANY top rated mutual funds in cash I must say I am very worried about what might happen with this market. Things are not setting up right for a rally.

The worst part of it is that we have already seen a distribution day, though it was with volume below average, we have to remember that almost every day the past two months has come with volume below average. The key is that volume was clearly higher than the day before on the Nassy and the index almost lost 2% on that day. This is not good and brings the chances of this rally succeeding to less than 50% as any distribution day within 4 to 5 days of a follow-through day is normally a rally killer (this information was gathered from Ken Shreeve of IBD in today’s ‘Market Wrap’ video).

Besides this poor day on Thursday, it was clear, this week, that the market is more-than-likely going to fail this rally. I would LOVE to be wrong and get long more stocks that look like N**, L**, B**, B***, and F*** but I can’t do that when nothing out there looks like that and when the strong CANSLIM stocks do setup they sure have not been acting right. Just the past two days, we have seen HLF, WFR, WMS, ANF, APOL, DV, STRA, TITN, INFA, CPLA, and RBN breakdown and reverse a breakout. This is NOT how leading stocks act during bull markets. There is not ONE bull market that you can find leading stocks reversing solid setups and then see the market take off making massive gains. Not one; leading stocks always lead real bull markets. The market is going nowhere and will not go anywhere without leading stocks. That is just the way it always is.

I have been posting the current leading sectors and areas of the market recently that have been leading us recently. It is obvious by the quality of the sectors that this rally was suspect from the very beginning. However, as long as these sectors stay near the top of the list, I believe the market will be in a bit of trouble. Since most of the sectors that are now leading have come from such laggard bottom 20% spots, it could be a while before we cycle into a new true leader.

When we do, those leaders are inevitably from an innovative technology related sector. Recently I have noticed a couple of Semiconductor stocks making new highs (RMBS and RBCN) and that has gotten me a little excited that we could be getting ever closer to a tradeable rally sometime in the near future. Along with those two Semi stocks, a few Software stocks have shown up and even though two of the three are low quality the fact they are showing up is a good sign for those that think we may never see a bull again. LOL, eventually, with time and price and regular cycles, you HAVE to have a bull. We just have to be patient and wait for better quality than what showed up today. It should also be noted 2 of the 3 hitting new highs have been bought out. Only ERES is of any real quality and that stock is in such a lagging industry group that an investment in it would probably be a mistake.

Still though, the typical bear market stocks are leading now. Medical, auto manufacturers, oil&gas, chemical, food-meat, beverage, housewares, and the other usual suspects we have talked about are where it is at and if you are focusing on going long anywhere else in the market you are only decreasing your chances of succeeding which are already significantly reduced in this “I refuse to rally” market. I still believe it is smarter to completely stay away from longs and for newbies to stay out of shorts here. Professionals are more than welcome to short your favorite candidates on low volume rallies and heavy volume failures.

I believe it is going to be about time to start looking for shorts again, if this market stops moving sideways and starts falling. The IBD 100 and IBD 85-85 index both still have an Acc/Dis rating of D which shows that since the January rally NOTHING has shown up that has led this index higher. Even the few beauties that this index has produced has returned nothing and a lot of the stocks in here moving higher have a look of stocks that are not going to be able to produce to much more to the upside without volume coming into the indexes.

Without that volume we can expect to add to the losses already suffered this year. The best index is the NYSE which is down only 10% since January. What is funny is that I am running a small account for a friend where I am very aggressive and even with a 2 out of 12 record so far I have only sustained an 11% loss putting me on par with the NYSE. However, I started trading this account in November so the NYSE is down 15% during that time. So I am really beating the market in every account on all time-frames still and I would consider this my worst trading ever, not due to my ability, but due simply to the market.

Since November the Nasdaq is down 20% and is down 15% from January 1st. I am doing much better than this index. But the one I always focus on is the IBD indexes. There they are down 30% from the November top and 20% from January 1st. Clearly my 4% gain during that time from November to now and 0% return so far YTD is KILLING the IBD indexes. If I am up 4% on my biggest account and only down 11% in my friends small account, while the IBD indexes are down 30% from November, how do you think I am going to do in the next bull market when the IBD 100 is up 75% while the Nasdaq is up 45%? If I am outperforming the IBD 100 by nearly 35% in a bear, then I am going to crush the 75% return in the next bull. AND SO WILL YOU!!!

The only way to make sure that you will be able to do that however is if you get off your butt right now and start to take the necessary steps that will make sure you are ready for the next bull and will know what to look for. The first thing I would like you to do is study EVERY SINGLE ONE of my ‘past big winners’ in my silver longs section. Go to the very first post and work your way one by one through them all. By the time you get to the end you should basically be able to see the EXACT same similar thing in EVERY single one on the buy and on the uptrend. After that, reading ‘Monster Stocks’ and ‘How Legendary Traders Made Millions’ by John Boik is a REQUIRED REQUEST of mine to you. Both of those books will show you the best stocks from 1997 to 2007 (in detail) in the first book and the best stocks and active-investors from 1897!!!!!! to 2007 in the second book. You will see the same thing EVERY decade during every bullish uptrend and even sometimes during the flat and bearish market phases, just like you will with my own records with my ‘past big winners’ from 2000-2002 like CRUS and GNSS.

Some key measures I am watching is the put/call ratio which is still over the 1.00 level at 1.02 which says that the crowd is still a bit bearish as they continue to buy puts with no abandonment. However, it appears that it is possible that the crowd is actually right this time as the charts confirm that lower prices should come about. But we probably just will go nowhere, since the market almost never rewards the options players as 80% of all contracts expire worthless. NOT my kind of odds. I prefer the CANSLIM system where I am 25% to 33% in most bear markets which still produces gains for me since my winners do much better than my losers and 75 to 85% in most bull markets where some HUGE gains can be found in early bull markets along with some decent gains later on.

On Monday there sure were a lot of cocky bulls that swore we are going nothing but higher for the rest of the year. At least that is exactly what they made it sound like. Instead the DJIA fell four straight days after the impressive gains and the Nassy and SP 500 fell the last three in-a-row, killing the fantasy and dreams of the perma-bottom callers. By the end of the week, it was clear who is still basically in control, even though the short-term trend is up, because the DJIA fell 1.2%, the SP 500 fell 1.1%, the NYSE fell .5%, but the Nassy did manage to buck the trend did finish the week with a .1% gain. That obviously is nothing to get excited about. Especially when Friday produced an extremely low amount of new highs to a lot of new lows. There were 17 new 52-week highs to 118 new 52-week lows. That, with the overbought condition, in this market might not be very good at all.

Before I wrap this up, I want to remind everyone that you need to just forget about playing this stupid bottom-calling game. Leave that for Cramer. While he calls everything a bottom and then gets it right one time while breaking all his readers with the other 100 calls, I will just wait for the right time to get very long.

Don’t forget that back in 2003, Cramer only produced six legitimate 100% winners: NT, Q, ATT WIRELESS, GLW, CNXT, SKYW. He also hit it big with three option plays producing some HUGE gains on small positions. So while you got six winners over 100% with the best one up 500% and the rest only up 150% or less, I produced over 50 stocks that produced 100% gains from 02-03. With that, there were four stocks that I LOADED UP on that each produced 300% plus gains. I was also long SINA, SOHU, NTES, and TASR which all produced over 1,000% gains. Not only am I outperforming Cramer now but so is the SP 500.

When the next bull market comes, hopefully we will have a VIX over 40 and a BUNCH of stocks that looked just like what you saw from my ‘past big winners’ from 1999-2003. I tell you what I can’t wait till I can get that thing updated to RICK and APPY of late 2007. It should be the end of the year before that happens. That way I can stop being asked by all the newbies about stocks after 2003. I have gone over my past big winners from 2003-2007 many times in random post. If you missed it, you are just going to have to wait till I post them on the site. Just be patient.

The very last thing I want to end this one and make clear is that IF YOU GO LONG A STOCK IN THIS MARKET, AND IT DOES NOT IMMEDIATELY SHOW YOU GAINS, YOU NEED TO CONSIDER SELLING 25%, 33%, OR EVEN 50%. IN THIS MARKET, IF A STOCK DOES NOT FOLLOW-THROUGH RIGHT AWAY FROM YOUR DAILY BREAKOUT, YOU JUST CAN NOT WAIT FOR IT TO WORK OUT LIKE YOU CAN IN A BULL MARKET. Exercising intelligent common-sense judgment goes a long way in the stock market and it is obvious that in a bull market you can be patient and give your stock a few days after the breakout to get going. But in a bear, you need to see results IMMEDIATELY, especially you newbies!!, or else it is best to cut back on it so that if and when it does fail you don’t end up suffering a major loss if something unexpected happens.

Be careful out there, keep your longs small, pros keep your shorts manageable, and remember everyone CASH IS KING! Enjoy your weekend of spring training baseball, NCAA college basketball March Madness, a little NHL hockey, and A LOT OF TIME WITH LOVED ONES! They are WAY MORE IMPORTANT than this stock market. ALOHA and I will see you in the chat room where I am always online.

current longs/(shorts) up today and their total return since purchase: EBIX 124% CMP 45% PTEC 98% (BA 23% FTEK 22% GOOG 33% SIGM 44% ATI 28% CMS 20% EEFT 26% ASF 33% SHOO 34% LVS 35% BEN 23% EEFT 26% SGMS 40% MI 32% GRMN 40%)

But it is important to pay attention to the market right now as things are lining up for at least a powerful short-term rally. When we look at the put/call ratio we can see that on a huge up day that it jumped to 1.12 which is a very high level of fear on such a bullish day. That tells me that market players expect this market to move lower on the short-term. Too bad these guys are almost always wrong. Therefore, the extremely bearish bets on such a strong day is a bullish item short-term.

The investors intelligence survey shows more bears than bulls for the second straight week, with bears beating bulls 45% to 31%. This is a very wide margin and considering we have a high put/call and a follow-through I think it is very important to make sure you are not overextended to the bear side. Just on Thursday it appeared it was all over for the market. How amazing that on the VERY NEXT day all looks well. But such is the nature of this market.

And even though I have been pounding the table telling you that cash is king, it is time to start looking for potential setups in CANSLIM quality longs that are in well formed bases. Right now, there are not a lot out there but there are a few stocks out there that are starting to show up that I would like to get long if they could quiet down, move sideways on lower volume, and breakout on strong volume with BOP green to max green the past few months. Some are starting to show up but the few that are are NOT in your usual powerful bull market leading groups. They are in the small banks, savings & loan, medical, manufacturing, business services, auto/truck-parts, tobacco, and transportation-railroad stocks. These are not the exciting innovative groups that lead most long-term bull markets. These are the groups that normally show up in bear markets. However, during the bear market rallies, these stocks always do very well.

But how well these will do with a VIX at 26 is the question. I have a bad feeling I know how well they will do. During the last bear market we had in stocks, I still had no problem finding a few stocks here and there that produce good gains. But besides COIN which rallied 58% in three weeks, I have not had any big winners in this bear. This is unheard of. And it isn’t me that is the problem. The problem is the market. I finally have a few really green charts that are looking good. But usually, even in bear markets, I will have a couple of stocks that have produced 75% or more by now. This market is simply THE WORST market in twelve years that I have been a part of.

Now, like I said, there finally are a couple of chart that have shown up that are full of accumulation and max green BOP. But the way the market is still acting it is very hard to “load-up” on these. So I am going to continue to keep it cautious but my first long position over $60,000 has finally been taken for the first time since September. That means that I am finally beginning to think that maybe we could sustain a rally here. The good news about my methodology is that if this trend reverses, I can be out with less than an 8% loss on both stocks. If they don’t blast-off and make immediate big gains, there is no reason to be long and they will be cut.

I love being a bull and if this market can continue to build on these gains WITH HEAVY accumulation then I will embrace this rally with arms wide open. But for now, I am as skeptical as you can be. This is due to the constant flooding of emails from bottom callers (which oddly enough don’t happen anymore) since the November top till about two weeks ago that we were bottoming. Now that the donkey losers that make up this group of emailers have stopped with their FACTLESS crap, I am ready for a bounce. But the fact that everyone is still looking for a bottom makes me believe that there is almost NO WAY that this is the bottom.

I have never seen a prolonged selloff where everyone is bottom calling actually bottom during the time all of these amateurs are calling for a bottom. After a very long bull market, where every single leader of that uptrend gets broken, it usually take a long time to form a bottom. If everyone I talked to was telling me that they were scared to death of a financial collapse and that they believe they should be selling stocks left and right, then I would be looking for a bottom. But everyone I know wants us to bottom now so we can go back to getting long GOOG and AAPL for the next attack on the old highs.

It would be nice to bottom here and then in about a month (it would take that long) start going long a bunch of stocks that look like all the patterns in ‘my past big winners’ but I just don’t think I am going to get that opportunity yet. Before that could happen in 2003, we had to have a horrible 2 1/2 year bear market. And before those perfect beauties of 1999 setup, we had a Y2K fear that sent companies investing in technology at a breakneck speed. This along with the bear market of 1998 (LTCM fiasco) helped create a ton of near-perfect to perfect charts. Since I doubt we will see another 1999 setup until I am, maybe, 100 years old, then we probably need a very long bear market to create the charts we saw in 2003.

I know a lot of people do not want to wait that long, but if that is how long we must take before we can get the next TASR, EPIC, EVOL, FMDAY, SSYS, TRAD, USNA, SINA, SOHU, NTES, FARO, and SIGM setups, then dang it, I will wait as long as I have to. A lot of people want to make money right now. But as those impatient and historically ignorant traders do damage to their account (like yours truly) by forcing trades that should never be forced (I am not forcing them, the market is just that hard!!), the smartest traders are in 100% cash loading it up for the moment when the stocks above are waiting to be taken.

Like I keep saying, you do not have to bottom tick the lows or bottom tick the day the market hits the lows to make a ton of money. EGHT and FMDAY both produced 300% gains in one and four months respectively. Both of these stocks STARTED their move in late October/early November; ONE FULL YEAR AFTER THE OCTOBER 2002 BOTTOM!!!!!! So the FOOLS, MORONS, IDIOTS, and SCUMBAGS on wall street that tell you that you have to buy the bottom can go F themselves. These idiots can buy THE BOTTOM TICK and they will not come close to TOUCHING my returns by the EOY. The scumbags like to brag when they get the bottom right. Too bad they never remind you about the other six times they got it REAL WRONG.

Calling a bottom here makes more sense than any of the other attempts, as we had the VIX hit 35 intraday (still below 40 and the last indicator to get extreme enough to have a great low), the investors intelligence bears take the bulls, and we have a put/call that has been pervasively around the 1 area for months now. So it makes sense for the donkeys to bottom call here now. However, do they not see that there are problems all over the index charts, besides the bad leadership and destruction in past leaders underneath the indexes.

My first problem with becoming a bottom caller is that it only works 10% of the time and those are odds I will NEVER take. Therefore, I never will bottom call. But I believe in my multiple years of trading FULL TIME I have seen many tops and bottoms during that time. I have learned that calling a bottom before prices can at least get over the most recent resistance is a recipe for disaster. Sadly, the constant bottom callers never have to eat the egg on their face. They just conveniently forget and move on.

On the NYSE, I love the volume I see on the January and Friday’s lows. The huge volume surge along with the accumulation leading up to Friday’s move is very bullish. But that volume is still leaving much to the imagination as the selloff in January came on heavier volume than the uptrend from January to February. That was followed by heavier volume selling that received some sneaky accumulation during that time. At best, this index is very mixed with the extremely short term looking bullish compared to the overall downtrend from November which is still VERY much in tact. Especially with price below the 50 DMA.

This almost exact same kind of action is happening on the Nasdaq also. The volume near these lows have been incredible but the overall downtrend is still very much alive with the price below the 50 DMA. The bottom line is calling a bottom UNTIL YOU ACTUALLY KNOW it is a bottom is foolish and if you are one of the fools that think you must buy the bottom to make the big money you really are ignorant and need to study the past big stock market leaders like CSCO’s 80,000% gain, SCHW’s 10,000% gain, or MSFT’s 10,000% gain. Do you think you needed to bottom tick to score big gains from those winners? Of course not. So don’t believe the MORONS that tell you you need to be buying here. You can wait. In fact, I hope we go on to crash just to show these fools how dangerous the verbal shit that flows from their mouth really is. If we bottom, I can hold off for months!!! and still CRUSH ALL OF YOU who think we need to buy “the exact bottom.” You all have SEVERE historical mental problems.

All I am going to do is continue to look for my hot charts, as I know when they show up, and if the market is in an uptrend, the coast will be clear for me to go all-in with my 2 to 1 and 4 to 1 margin accounts. There is no need to buy here with all the carnage out there. The greatest traders of ALL-TIME waited for trends to be confirmed up or down before making any big bets.

That can proven by those who made big recent bets in gold and oil. My God it looked like gold was about ready to explode to the upside and become the next bubble. But it in fact was already in a mini-bubble and now we can only cut our losses and wonder about what could have been. The most important point that came out of the gold selloff is that even leadership is NOT safe in this market. If you can’t find comfort in your leaders, even in a bear market, you know that you have some very serious issues to deal with. So calling this a bottom, IMO, is the most ignorant thing you can do after getting the last six to nine calls wrong.

Some interesting items of interest from Thursday’s session includes oil falling to $101.84 and gold falling to $920. Gold just touched $1020 intraday on Wednesday (I believe) and since then has spent its time selling off hard. This is a clear sign of a sector that is putting in its top. This comes with oil stocks recently reversing hard and EVERY chemical-fertilizer stock FINALLY rolling over on strong distribution and starting its selloff on heavier volume with low volume rallies. They are not ready to be shorted in bulk yet, but if the market does not breakout above the 50 DMA on heavier volume soon, confirming the FTD, then it will only be a matter of time before the ugly charts in the chemical, oil, and gold group really get nasty. Breakout fakeout reversals are NEVER good for the market, when they happen in leading industry groups.

However, like I said, if the market can build on these short-term gains, I would love to start finding some more stocks that are as green as NEU. If a bunch of charts start showing up in industry groups that are FLYING up the list of top industry groups in IBD’s 197 group list, then I would love to jump back into the market long and strong. But for now, we are lacking any leaders. Every time a new leader gets rotated into the top spot they WHACK it. In my recent RM columns I have posted the charts and stocks that I am finding very attractive and that are also the current leaders. However, the small-regional banks and savings & loans are not going to produce any 300-500% winners in 12 months or less. So we better hope for higher quality or else we are going to be sitting on our hands a lot long than expected. Well, expected by readers. I am ready for a two year bear market or for the bear market to end today.

All I need to know it is over are more charts setting up like the stocks you see in my ‘past big winners’ or like TESO, AFSI, HRZ, PTT, APPY, CVO, MT (IST), BOOM, ZEUS, IHS, MA, CCC, TNH, MOS, OMTR, or ERS from 2004-2007 that I have not posted yet. I KNOW HOW TO FIND AND BUY THE BEST STOCKS THAT PRODUCE THE BIGGEST GAINS IN A SHORT AMOUNT OF TIME IN ANY BULLISH MARKET (YOU DON’T NEED TO PICK AND GUESS AT THE BOTTOMS). I HAVE NEVER SEEN A MARKET LIKE THIS OVER THE PAST SIX MONTHS IN OVER 12 YEARS OF INVESTING EXPERIENCE. THERE STILL IS NOTHING OUT THERE to get insanely excited about besides one stock that I have recently started going long and adding to. If you are not a subscriber, there is no way I am telling you what this near perfect stock is. But it needs a bit more time moving sideways, another pop, and it would be PERFECT! If I see more setup like that I will be more than happy to rejoin the bulls. For now, that is not happening.

We have not had a market like this since 1938 as there have been 28 days this year where the market has moved at least 1% by the close. Nothing is going to make sense in that kind of volatility, unless every day was up or down. Right now, the market is just trying to wash the weak blood out so that when the fresh faces and cash heavy traders return they can come over and pick up the easy cash in the corner and profit handsomely via the smart money that is trying to pick the bottoms like the professional-amateurs they will always be. That is why they have to keep their job at the trading desk; they would NEVER last on their own.

But for now, until I see more technology and innovative groups make their way to the top of the IBD industry group list with some very green chart setups, there is no way I am joining the bottom callers with small regional-banks, tobacco, medical, savings & loans, and beaten up junk sectors leading this rally. WMT and NKE are not my ideas of “fresh, new” leadership. V is my idea of new leadership. Hopefully, this could be my next MA 340%-plus winner. But unless the market continues to trend higher, V will more than likely suffer the same fate the market does. Still it is nice to see an IPO price and run after the public offering.

Until I get more confirmation on the upside, I am simply not going to fall in love with this FTD. I recognize it and realize we have one and that it is time to start looking for stocks that are green like NEU that are setting up or breaking out of well-formed bases like the cup, cup with handle, double bottom, flat base, high-tight-flag, saucer, saucer with handle, or three-week tight pattern. This market is not a market to be overleveraged. Keep the longs small, keep the shorts small (newbies avoid going short the rallies until you have a track record of making money going long), and keep the cash VERY VERY HIGH.

This is the most cash I have had since 2002-2003. When the 2003 follow-through happened I was long 35 stocks. By the end of 2003, I was long over 90. You don’t have to be all-in long AT the bottom. You have plenty of time to get very long. GO STUDY 2003 in TCNet and learn for yourself that you don’t have to bottom call to get FILTHY RICH. My ‘past big winners’ should PROVE this! If you still are not convinced, please, NEVER come back to my site. Mahalo and aloha! I will see you in the chat room where everyone is in control, thanks to the CANSLIM methodology. God bless you IBD, O’Neil and the CANSLIM system!!!

Pray for surf!

There was one surprise for traders today and that was the news that ABK would not be bailed out. This caused ABK to fall 18% today and despite the stock looking like it bottomed back in January, in fact, just might have been a temporary stop on the way to 0. There are many other stocks in this group that are in this position as PMI, MBI, and MTG are all, in my opinion, more-than-likely going to zero. I only wish I wasn’t focusing on longs so much when they broke down in October. I do regret not getting short these horrible stocks.

Another stock I regret not getting short is TMA back in August. This stock here shows the importance of patience. As all of you know, I do not cut my FINAL losses until a long is either below the 200 DMA or the short is above the 200 DMA. There are, of course, exceptions. But I would say 80-90% of all stocks fall under this requirement, once they have substantial gains. TMA is just one of those examples. Had you lost your patience with this short come the rally in February–which never closed above the 200 DMA–and covered it all, you are probably feeling a little silly. You should; your lack of patience just cost you a 92% gain on a short in seven months!!!!!!!!! If that is not hot, in a bear market, I do not know what else is.

Not all shorts are going to act like ABK, MBI, or PMI (the price has stayed below the 50 DMA the entire way down). Most of them are going to do what TMA did. While it is always OK to take big gains after a fall like that, to take all of the gains off the table before knowing that the actual trend has changed is very silly.

Before I get back on talking about this current stock market I want to make it clear that stocks like ABK, PMI, MTG, MBI, TMA are the reasons why you should NEVER play falling-knifes. If you buy stocks in uptrends, THIS CAN NOT HAPPEN. You can get a few gap lowers here and there, in a bull market. But usually by the EOD, those stocks will be back near the HOD. This is why gap lowers in an uptrend never scare me out. As you can see by most charts, when a stock is in an uptrend, gap lowers usually are supported as long as they are near a moving average or key support. It is the time when those stocks gap lower are not supported and further selling on heavy volume occurs that it is time to leave. But as long as you are not buying stocks in downtrends you can not suffer these kind of losses. Cutting your loss short keeps you out of horrible stocks.

Why is it important to cut our losses? Do you remember a great long for us named NAVI that we completely got out of for a nice gain in December? Take a look at the “buggah” now! Even if you did have too big a position remaining, and after the day of the gap lower on 12/10, you sold it all, you are still doing much better than the “Cramer, Marcin dip buyers” did going after NAVI. Since our final sell (for a profit), NAVI has fallen an insane 50%. Thank God for the CANSLIM methodology. I will never have to worry about another NAVI happening to me. And trust me it happens more than once. Let’s take a look at another one.

Do you remember a volatile little gem that we gave a chance to named LGTY? Not only did it fail once in October on the breakout. It failed again in December when it tried another move. The second failure should have been a huge warning that something was very wrong with the stock. I mean, heck, if a stock forms two solid bases on strong accumulation and low volume and fails both of them and the market is trending lower, you better get out of the stock. If you didn’t you sure are hurting today as LGTY gapped lower and sold off today for a nasty 41% haircut. That is a 41% devastating hit. If you did not cut your final loss when we did, you are now down 52%.

Two stocks, one made me money, one left me with a small loss; to many, those stocks ended careers. If only those who were on the other side of the trades would have known a few basic facts about technical analysis, the painful losses could have been completely avoided.

These examples go along with the IMA, C, and GS columns that I have published over at Realmoney. I doubt Cramer is reading them but I pray his subscribers are. Because had they listened to TA 101, they would have saved their ass instead of possibly still buying IMA–a stock Cramer is still “not passing up.” At least he is buying AUY which is a stock in an uptrend. I only pray that one day he will realize that the stocks he buys moving up continue to move higher while the stocks he buys in downtrends selloff at vicious pace. Maybe one day but I doubt it.

Back to the market, despite the wild sessions that we have been seeing recently there are still a lot of high quality CANSLIM long candidates showing up that are producing nice slow steady gains. As long as these commodity related longs, with a few pollution control, medical, and other defensive names, keep setting up and breaking out of well formed price/volume/BOP patterns I will continue to poke around and get long a nice basket of leading stocks. Since there is no telling of what a stock might do in this market as some stocks have been destroyed overnight, I will keep the longs spread out as it seems every stock in these leading sectors are doing well but there isn’t one particular stock FLYING in the face of the others.

Along with these nice longs, though, I figured I would be slashing shorts that are making either real bottoms (based by volume and price action) or are breaking above key moving averages. However, all of my shorts are trending sideways, moving lower on high volume, rising on lower volume, trending sideways, and moving lower again on higher volume. So therefore the shorts that I have seem to be ripe for more lows. The bad apart about that is that all of my shorts, obviously, are in very weak stocks which happen to be in more innovative sectors of the economy.

Commodity longs are fine as they make the same dollar that every winner does. But a sub-25 VIX is going to make it hard for AUY to produce a 550% gain. I would be ecstatic with a 100% gain. Along with those, food, steel, silver, oil, solar, medical, agricultural, machinery, pollution control, and chemical stocks are looking great but I doubt we are going to see anything fantastic there. And as for the stock I said I wasn’t going to name anymore until it finishes its perfect chart kind-of did that by losing its max green BOP. At least it is still green. But it is also moving to new highs which if it continues to do is great for my current position. But bad for the HOT chart that might have become a large position. Oh well, I am sure there will be more in the future. Heck, maybe NEU can go sideways for five weeks. That would be HOT with its price, volume, and max green BOP pattern.

But besides these commodity stocks, which are bear market leaders, not much else wants to lead. Those sectors listed above are not good for the overall health of the market and basically signals that we have a major dose of inflation hitting us across the face. Even when you look at the new highs to new lows it is still very clear where the market is leaning towards. There were 62 new 52-week highs, basically ALL commodity or defensive related, to 244 new 52-week lows. On a day that the stock market was up, that is not good at all. This tells me that the market does not want to rally. It tells me that inflation is gang-busters which will cause commodity stocks to probably go parabolic (look at all the powershares DB funds on an arithmetic chart to see the exponentially growing price and volume) thus giving us good returns there and horrible returns at the check-out lane.

That with the large amount of new lows and all the horrible economic numbers that keep coming out, like today’s ISM index still low reading, is not going to bode well for this market in the long-term. There still are no max green BOP perfect charts (NEU is now the closest), there is not any huge accumulation in the stock market indexes, there is not enough fear in the sentiment gauges, and there are no real innovative and technology leaders in the industry groups that are starting to setup beautiful green BOP filled well-formed bases. Instead stocks like AAPL MSFT BIDU GOOG show you how the innovative technology companies are doing since the November top.

The bottom line is that this mess will continue tomorrow and could continue for a few more days or a few more years. NOBODY actually knows when this market is going to bottom or fall apart again. The ONLY thing we can know is how to react to either an upside breakout, a downside breakout, or more consolidation. This will allow you to make money no matter which way the market decides to go.

The most important thing is to be patient and update your watch list with fresh candidates as you wait for a new bull to start. And when it starts I promise you I will be there. Am I missing the longs now in XIDE or AUY or MTL or JRCC or GEOI or BVN or COIN or CMP? So when the next 1999 and 2003 comes around, with all of these charts that will look exactly like my ‘past big winners,’ there will be no way in hell I will not be ready. That day sure isn’t today. Not when the put/call goes from a near-fearful reading of 1.27 down to 1 today after a lame rally that saw ABK not get bailed out. That news and the selloff that followed should have kept that put/call up there. Instead it fell to 1 and the VIX dropped to sub-25. People are full of fear and too pessimistic? Maybe in the short term. And that is probably why people are looking for shorts, WHEN I AM GIVING THEM SOME VERY PRETTY AND GREEN LONGS. This will also be why if another low volume rally starts, I will be excited to short it again. That would put the former leaders around that historically high odds time to short stocks. FIVE TO SEVEN MONTHS AFTER A STOCK TOPS. This is when they fall the fastest, hardest, and in the least volatile manner down. We will see if history can’t repeat itself.

For those that still are looking to buy the NASTY AND UGLY stocks that are below the 50 and 200 DMA’s, you need to go to my most recent Realmoney columns on IMA, C, and GS. Read those three columns and tell me it you don’t see the same thing in all three stocks. Just like you will see the same thing in all of my ‘past big winners.’ HISTORY WILL FOREVER REPEAT ITSELF, NOTHING IS KNEW UNDER THE SUN, AND IT IS NEVER!! DIFFERENT “THIS” TIME. Aloha and I will see you in the chat room!