Was It Really That Bad? Nassy Falls On Lower Volume And NYSE Volume Rises But Remains Below Average; How About MXC, CKX, FPP, PDO, ROYL, and CLR!!
May 20, 2008
It sure was not a bullish day but at the same token it does seem people are treating today as the beginning of the end and in my investment life I have learned that when everyone thinks that something is going to happen the opposite usually happens.
on that note, today’s selling sure did bring out a lot of people that are worried about further selling. To that, all I have to say is if you have some profits and do feel afraid you will lose some. Why don’t you sell 20%, lock in some gains, sit back and relax, and then let the stock TELL YOU what to do next. For now, I don’t see a reason for all the worrying that I saw today. How I judge how bad selling is is to see what it does to my current holdings and to see what the short scans bring up.
When it comes to the 70 plus stocks I am long (14 are of good size the rest are nothing that will change the fate of my world) there were ABSOLUTELY ZERO that gave me a FULL sell signal. Everything that pulled back did so either on low volume, barely pulled back on higher volume and had a bullish reversal before the close, and/or if it did pullback heavy it did not close below either significant support or the 50 DMA. Now I hate to be a party pooper for the HUGE short interest that is out there but facts remain that when a market is ready to top I will not only have a few partial sells I WILL HAVE A FEW FULL SELLS. Tonight, I had NO full sells.
On top of that, when I go over my short scans, another thing became clear. There is nothing I want to short and there is nothing that I can short (in size) that is either a safe short or a smart short. The truth of the matter is that this market may not be the healthiest market AT ALL but it is still alive and the uptrends that are within the current market are still alive.
If we would have sold off today on heavier volume and volume was heavier than the 50 day volume average, then obviously I would be a little more concerned. Another area of concern would have come if I had a handful of full sells which is very much possible when you have a real top. The final straw that broke the bearish camel’s back was finding NOTHING in my scans that could even be considered a safe short. Well, I guess there was one stock, that did show negative divergence but the lack of red BOP or HUGE distribution pulled me away from that one.
For now, the market still is just going nowhere on low volume. I am kind of shocked by how many “bulls” and how many “bears” I see out there. There should not be so many polarized opinions on the market out there, when the market is in the middle of a bunch of trends. The primary is down, the intermediate is up, the short is sideways. This is not a market to be a hardcore bull or bear. Especially when we don’t have any shorts working and we continue to wait for more than one “hot and perfect” chart to setup in a good stock. We have had a couple start but they have all stopped. There is nothing out there right now that is flooring me except one stock that starts with the letter X. That is the ONLY one. There are many other really really really nice ones but I am still waiting for my perfect charts. Until I see these, being a hardcore bullish is just wrong.
What else is wrong is being a bull when the NYSE has had 43 straight days below average volume. How anyone can be a raging-bull here with volume as pathetic as it has been is just silly to me. Also silly is being a bear when shorts are clearly not working here and stocks like MXC and PDO are up 1,000% and 600% the past quarter. I don’t know about you but being short stocks when you have a chance to take part in a 1,000% and 600% gain tells me that odds and reward/risk analysis is not your “forte.”
The bottom line is that some people are simply too focused on a market that intelligent and experienced traders are not “completely” focused on. That is why you don’t see any volume. THE SMART MONEY is NOT investing right now. If they are, they are doing it very slowly and are ONLY accumulating the Nasdaq stocks as the Nassy is the only index that has traded with volume above average. The good news about that is that the days when volume moves up the index moves up or has a bullish intraday reversal. if this pattern keeps up the low volume rally will continue.
Now, while that is not really good for a lot of stocks as few stocks are making big gains, there is one group that does have stocks making very big gains. That group, of course, is the oil&gas stocks. This group is simply incredible and is about the only group that anyone should be focusing on, besides the few select technology stocks that are starting to come alive. However, the few that are setting up are starting to show sings of slowing down. So it is best to continue to focus on the ONLY group (besides the metals) that is moving in exponential ways.
8 of the top 20 industry groups based on six-month price performance are in the oil&gas/energy sectors. Today 8 of the top 10 groups that had stocks hitting new 52-weeks highs today were in the oil&gas groups. Canadien Int, US Expl Pro, Int Int, Drilling, US Royalty, Canadien Expl Prod, Int Expl Prod, and Field Services all had 14% to 67% of the stocks in their groups hit new highs. That is amazingly impressive.
The final mind-boggling stat of the night comes with the new highs and new lows. That is where the dominance of the oil&gas/energy stocks become extremely apparent. Out of 153 new highs (which beat new lows today 153-107–this is bullish divergence), 87 were from the energy sector. That means that 60% of the new highs are coming from just one group and this is the last but most firm confirmation that we have one group leading and one group only. As long as we have leadership, the market should hold up.
Another bullish divergence came with leading stocks, as the IBD 85-85 was up .7% and the IBD 100 was up 1.1%. This shows that leading stocks, via the oil&gas/energy arena, are still leading this market, even when we pullback. I don’t know about you, but all of this bullish action UNDERNEATH today’s losses, combined with the NYSE short-interest hitting another all-time high at 13.68 and the put/call jumping from .82 to .96, makes me want to remain “A LITTLE” bullish on the market right now. And that means I will continue to hold my longs that rally until they are no longer rallying. When they show weakness, I will take profits as low volume shows no conviction in the rally. If this was a heavy volume rally, I would not look to sell 10% or 20% on a 25-50% gain. Normally, I would hold for even bigger gains. But this market is too unpredictable.
I want to thank Regulation FD, Sarbanes Oxley, all those lazy ETF’s (that take in SO MUCH money that could have been invested in real stocks), a low VIX, and a psychotically biased extreme-left leaning liberal media for making this a very difficult period since the April 2006 top. I have been able to still beat the market but the more I see these perfect charts just turn into mush, like a great pumping swell being destroyed by wind, the more I get disappointed with this market. Sometimes, I just wish it would break wide open by 50% and then reset all the bases to give us a brand new fresh start with solid steady accumulators of stocks. Then maybe I could get another DGLY to setup. DGLY today is not the same DGLY it was just two days ago. What a difference max green BOP can make in some of my longs.
The fundamentals will always drive 80% of all my buys. But the chart is always where the FINAL decision is made. I WOULD NEVER go long a stock without knowing what the stock was doing on a daily, weekly, and possibly longer time frame. Along with that I always want to know if the market is moving up or down. I am sorry, those who do not go with the trend are forever to have mediocre results compared to my methodology.
I hope everyone had a decent Tuesday and hopefully Wednesday will be a better day for everyone. PWRD and GA sure did stink but did you see the action today? By not cutting our losses and admitting we were wrong we might have suffered an extra 5.6% and 6.4% loss. I am sure those losses will expand. One lesson to take away from this, those who loaded up on either of these (I had a large position in PWRD but my winners have cleared, by a wide margin, the 11% loss taken overall) is to make sure a stock is under heavy accumulation before you go long.
PWRD showed mutual fund ownership falling 26 to 17 to 16 the past three quarters, despite some VERY impressive growth in the EPS and sales. That is your first red flag! Why is this stock’s fundamentals so strong yet mutual funds do not want this stock? This is very odd. When you see big EPS and sales growth, yet fund ownership falls AND THE STOCK HAS EARNINGS THE NEXT DAY, you might NOT want to get long. The same thing was up with GA. Not only did it have earnings the next day but mutual fund ownership fell from 14 funds to 10 funds the past two quarters. So two great stocks with huge growth but funds were fleeing. Instead of going long, based on the extremely solid and beautiful chart and the strong fundamentals, next time make sure EVERY SINGLE acronym of the CANSLIM system is followed. Not just the ones you like. By doing this you increase your chance of success by 100%.
That is all I can think of that I need to go over with you. Remember, stay agnostic when it comes to this market. Don’t be a bull. Don’t be a bear. Be a trend follower. That trend is mixed which means it is a stock pickers market and there is only one group leading. This makes this easy. Now the hard part is having a great setup with a perfect buy point to go long. That will not be easy with so many of these leading stocks trying to go into a parabolic exponential rocket ship mode.
Aloha and I will see you in the chat room where everyday we live green because our portfolios always are chock-full of winning stocks.
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Where do you look to see mutual fund ownership change? i.e. “PWRD showed mutual fund ownership falling 26 to 17 to 16 the past three quarters”
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