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!
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.
Nasty Day Ends With All Indexes Suffering A Distribution Day; Day Six For DJIA And SP 500 Officially Puts The Rally Under Pressure
May 22, 2008 | Leave a Comment
For those that do not know what that means, it means that it is time to raise cash by selling down some of our longs. We recently have gone long quite a few stocks that have performed very well. Some of you made the right decision and took a lot of profits when some were up 20% to 50%. That was very smart. I did take some profits but with my larger holdings I was trying to hold for some powerful gains, thinking that volume still might enter the market to the upside as funds went back to work so they would not show underperformance.
Instead it looks like they are starting to return as sellers and with all the indexes reversing or failing right at the 200 day moving average it appears that the 50 and 200 DMA’s will be resistance for the market that the funds will use to sell into. I pray that I am wrong and that tomorrow we are up a lot so that we can resume the uptrend with our longs. However, I am not wishy-washy and know when it is time to pair back my positions. After today, it is time.
Some might be upset that you are not selling at the top and getting the gains you thought you were going to get. But trust me, one day, WHEN VOLUME IS HUGE ON THE indexes, these same stocks WITH EVEN BETTER AND MORE GREEN TO MAX BOP GREEN CHARTS will show up and run and produce 300% to 2000% gains. Sadly, too many of you will be used to selling too much off when the stock is up 10%, 25%, and 50% that you will miss out on most of the gains. For some of you, that are EXTREMELY new, that is OK. But for those of you who have seen this game before, you know that selling too soon is not the smart thing to do.
Bears Can Not Follow-Through On Yesterday’s Weak Close; SOX Index Leads The Market Higher As Technology Stocks Come Back To Life
May 16, 2008 | 5 Comments
I had another rough day today but this time it was on the financial end. I have been receiving a ton of 0% to 3% interest rate offers recently from my various Credit Card companies. Everything has always worked out well as I max out the balance, move it to my stock market accounts, get an excellent return on my money, and then return the cash back before the APR moves back up. This has ALWAYS worked well.
However, today I learned the horrible ignorance of some offers. Luckily, this one is the only one like this, but my 2.99% special offer and regular 9.99% rate, due to the mail NEVER SHOWING UP IN MY MAILBOX, has been JACKED UP TO 29.99%!!! I have been a customer since 1999 and this is Bank Of Amerca’s way of saying thank you for NEVER having a late payment. It seems even if it is the mail carriers fault, if you miss a payment, your rates on EVERYTHING goes to the highest possible and it take six-months to reverse. So now instead of a nice steady payoff, I have to take the full amount out of my stock accounts and pay the whole damn balance off as I refuse to pay 30% interest rate!! This completely ruined my day only because I get great margin rates AND NOW is the time you want to be putting that money to work. So today has gone completely wrong and therefore I am going to bullet point my talking points as I have no interest in writing a full commentary tonight. I wrote too much in the longs analysis anyways. Paying subscribers can get there fill there.
-the NYSE short interest ratio has hit another all-time high of 13.63. It now almost takes 14 days to cover all the shorts. WOW!
Low Volume Consolidation After The Big April Fools Rally Is So-Far So-Good; CANSLIM Stocks Setup And Breakout But Volume Is Still Suspect
April 5, 2008 | 1 Comment
A weak open after a very poor employment report that showed the US lost 80,000 jobs in March with the unemployment rate moving up to 5.1%. It was a pretty lousy number but considering the fact that we had 25% unemployment after the crash of 1929 it isn’t “that” horrible. But the media, with a Republican still in White House, of course, made it sound like all hell was breaking was loose.
Maybe that is why the market could not build on the weakness and instead rallied higher the rest of the day off the lows until 2pm when traders unwound some of their longs into the weekend. Overall though, it was very positive action, following a strong rally on April Fool’s Day. That now makes it three constructive sessions in-a-row where stocks have held on to the gains.
Volume, however, was, once again, nowhere to be found as it came in lower for the third straight day on both exchanges. I would be A LOT more happy about the low volume consolidation if the indexes were pulling back. But they are slightly rallying on this low volume and while not bearish, by far, I still would much rather see higher volume gains and lower volume pullbacks. It is good to see that two of the three days on the DJIA have been lower. But overall they are slightly rising on lower and lower volume. Overall not a good LONG-TERM development. BUT! it is a very good short-term development as this is the first rally attempt that has not been thrown back immediately.
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.”
Stock Indexes Close Lower On Higher Volume, Producing The First Distribution Day Since The Follow-Through On Wednesday; Is This Rally Done Already?
March 29, 2007 | Leave a Comment
Stocks turned tail Wednesday and for the second day in a row dip-buyers did not show up as stocks moved lower, with an intraday roller-coaster ride mid-day after a speech by Ben to a Congressional panel, closing near the lows of the day. Things got off to a bad start, after the February durable good came out below expectations of a 3.5% gain with an actual 2.5% gain. That might have been bad but the ex-transportation numbers hitting YOY growth lows not seen since 2003 and capital goods coming in 1.2% lower and at lows not seen since 2004 were probably what really gave traders a scare. On top of that, add oil hitting six-month highs of $68 after-hours and settling in at $64.08 after weekly inventories were announced falling by 900k, comments by Ben that inflation is still a worry, and the tensions between Britain and Iran over the naval incident and you have plenty of reasons for stocks to go lower; and lower they went. Read more
