What A Crazy Market As Short Selling Is Being Eliminated In Some Corners, Day One Of Rally Attempts Are Hittng US, Some Longs Are Starting To Look Great, China Continues To Crash, And Mixed Signals Keep Being Thrown Around Everywhere!
September 18, 2008
Well the destruction from yesterday that killed the rally the day before has been re-reversed with an amazing huge volume rally in every index hitting the USA bourses. This was a HELL OF A SURPRISE to yours truly but is anything really ever a real surprise to me? No. I am ready for anything and all my studying and analysis of the stock market via charts has allowed me to be ready for anything and everything a stock market that can be thrown at us. Now, while many of you will declare a bottom to the market. Many of you will be much wiser and wait for what we fundamentalist/technicians call a FTD (follow-through day).
Subscribers to Gold and Platinum get full view with part two (longs) and part three (shorts) and many other videos like how to find the best winners in a bull market and how to avoid the stocks that fall 99% in one year. Enjoy the youtube version!
Below this tag line right here is a market commentary by BRIAN D. who is one of my best traders/active-investors in the platinum. Can you tell a difference between a platinum member and a free member? I sure as the heck can. WTFG!!!!!!! BRIAN D!!!!!!!
Wow, what a ride this has been! I think it will take some time to get
perspective on the historical significance of this week in the market.
By now I’m sure everyone has seen recap after recap as far as what
has been bailed out this week and when, so I won’t go into great
detail about that. But some of the things are just too crazy to
ignore. You had the biggest downday since 9/11, the biggest upday for
gold ever, the failure of one of the big 5 investment banks and
absorption of the other, the complete banning of short selling on 799
stocks, a VIX that finally moved again, a money market fund “breaking
the buck”, the nationalizing of a monster insurance company, options
expiration, 2 huge days in a row to close out the week, and last but
certainly not least the MOAB (Mother Of All Bailouts). Some say we
were on the brink of the abyss. Some say the bottom is in. We may
have just borrowed our way into a deeper hole. I will try to reserve
my opinions. I think the only thing agreed upon was that by Friday
many just wanted off this roller coaster.
Luckily for the followers of this site, if you’ve been listening to
what’s been written in this space day in and day out, you’re not very
involved in this market. Ideally, you’re in cash. If you were long
this week, you were in pain on some days. If you were short, you were
hurting on the other days. For the last few months, people have been
saying this market only good for daytrading. At times this week, that
could have been perilous, as volatility and fear returned to the
market in a big way. Gold spiked 10% in one day as investors looked
for safe harbor and bond yields went to zero for the first time since
the 1940s. Even money market funds were at risk of a panic, forcing
the government to step in and guarantee them, too. But for all the
craziness, the indices ended slightly up for the week, effectively a
wash.
There is still indecision in the markets. Things may be ready to
move, but no one knows if this is a slight blip before the big leg
down, or the bumpy trough before we get carried away by a new bull.
You could argue that the rally to end the week was bogus, spurred by
the complete ban on shorting financials. And even though this MOAB
has been announced, there aren’t too many details. It’s been compared
to the Resolution Trust Corp that was formed in the 80s to buy up all
the debt and hold it for a while until the market stabilized and the
panic left. Then the debt was sold back and the taxpayer absorbed the
difference. Okay, but right now how much debt is there, and how long
will it have to be held, and who will buy it, and for how much?
Nobody seems to know the answer to any of these questions. Who knows
how the market will react as it digests these ideas?
If you watch the financial news shows on TV, which I have no idea why
you would, you’ve probably seen bottom callers coming out of the
woodwork. And there may be reason. After all, the VIX finally broke
40 and hit one of the highest readings we’ve seen in years. 45 would
have been better but 42 isn’t bad. Also, on Friday New Highs beat out
New Lows over 2:1. That hasn’t happened in a long, long time. Volume
for the week on the nasdaq was the higher than anything this year or
last year (maybe ever, sorry I don’t have that data). The nazdaq
broke the July and March lows, but came roaring back, making a big
tail on a weekly chart with huge volume. All these things taken
together could indicate some kind of turn.
But then consider these facts that I’ve gathered from other platinum
chatroom members: The biggest updays come in bear markets. On 1/3/01
the nazdaq was up 14%. 3 months later it was down 38%. And as for
the VIX, TE22 pointed out that since 1990, when the vix spikes to 40+,
it spikes to 45 within a few days before a follow-through day occurs.
So we may see yet more volatility in this market. Also, there are a
number of other factors to consider that point to more downside: The
accumulation/distribution rating on the indices is not great, and on
the IBD 85/85 index is not good. And even though the BigWaveTrading
scans revealed 400 long candidates (this is a HUGE number) this
weekend, there was only one new long and one add to an existing long.
That is not what you want to see. This week has beaten up so many
stocks and made charts so ugly, that it was tough to find stocks with
good bases. Where does the leadership come from? You need that to
have a sound rally.
So what does all this mean? How do I take what happened this week and
make money from it? First off, I don’t think the average investor
can. If you made big money this week you are either a pro, lucky, or
a lucky pro. Either way, my hat is off to you. For the rest of us,
we continue to wait for a trend. This is a tough market, maybe the
toughest one in decades. Why try to force things in crazy times like
this when it seems literally anything can happen? This week was a
spectacle and possibly something we’ll tell our grandkids about and
read about in trading books written over the coming years. But from
my viewpoint as a CANSLIM investor, member of this website for over a
year, and someone who’s followed Joshua since March 2006, this week’s
hoopla was just noise. It was nothing we can use. If you follow
CANSLIM, you know that we still have not had a follow-through day. If
you are trying to get in early going long, you can get burned very
easy in a market like this. Why not wait until the odds are in your
favor? It’s been said many times, but no bull market has ever started
without a FTD. The best investors know the value of patience.
My gameplan has not changed: wait for a follow-through day, find
stocks in leading sectors breaking out of good bases, and then pyramid
into them. Even after we get a confirmed rally, you don’t have to go
all-in on day one. 1 out of 4 rally attempts fails. Also, the best
stocks can breakout up to 13 weeks after the rally starts. You have
plenty of time to be selective and put your money to work carefully.
We will have a new bull eventually, but nobody knows when. It may be
next week, it may be next year. The only thing we know is that it
will come. Until then, we must preserve our capital, study from the
greats, and never give up, no matter what the market throws at us!
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