Sunday, November 26, 2006

The Coming Week

About the only interesting news item on Friday was the falling dollar. Initially it seemed the market would use the news to sell off, but in typical fashion it shook off the news and finished the day barely down.

Nothing really exciting is on the calendar for the week. So keep an eye on the dollar news and see if the reaction continues to be similar to Fridays. We will also get news out of retailers on how black Friday went.

If you're long, stay long, and let the market dictate your next move. For now, there's no real reason to run for the exits.

Thursday, November 23, 2006

Market Update - Happy Thanksgiving

So, what's next for the market? They way it's going, the answers seems easy, up. And you'd be right. But there is one problem, too many doubters. So how do you turn the doubters into believers? Give them the correction they've been looking for, and then run the Nasdaq to 3,000. Can you think of a better way to get the retail money back in the game.

The market has the will and ability to pull this off. The news can't be better, oil down, rates down, inflation receding, Iran, Syria, & North Korea quieting down, and tech is starting to outperform. The stories just starting, and one word will fuel it, possibly to the end, VISTA.

Microsoft Vista may fuel an upgrade cycle like we haven't seen since the late 1990's. More drives, RAM, PC chips, video cards, you name it will be in high demand if the software truly spawns the next generation of software that consumers and corporations will want and wouldn't be able to run on their existing machines. In turn, the need for the latest chip manufacturing equipment will be required to expand and keep up with the demand.

Your job now is to look for and keep an eye on the current winners in the run from July. At this point most of these stocks are well into their moves and it would be risky to chase. Wait for the market to correct and look to be a buyer of these names out of new consolidations.

For those curious why it's been so long, I will write about my big recent mistake and how I had to pull myself out of it, soon.

Sunday, September 17, 2006

Blog Update

I am currently updating the blog with previous posts. Once this is complete, I will begin posting current commentary. Check back everyday. Or subscribe on the left side of the screen and have the blog update you via email everytime something new is posted. Thanks for your patience and enjoy the site.

Monday, July 10, 2006

Update: Full Bear

Just to give a quick update. I have changed my opinion back to fullybearish!! The market gave us a quick run to make some money on thelong side. Now is the time to go short and book profits. I will tryand eleborate in another letter on the reasons, but for now, we're busyflipping the longs and taking shorts. We may get another squeeze, butit should be short lived.

Wednesday, June 14, 2006

Rally Relief for Everyone

Are you ready for a rally? Probably not. The way the market isacting it doesn't seem the selling will ever end. But that doesn'tmean you should not be preparing. At this point the market is readyfor a bounce and way oversold to be initiating short positions. I'mchanging my opinion from outright bearish to neutral/bearish. Mylong view over the next few months is that we will follow the restof the world's markets into bear market territory, but in the nextfew weeks we're ripe for a sneak rally.

So why the change of opinion in the short run:

1. We're entering a period of relatively light news until the Fedmeeting on the 29th.
2. The Bull/Bear ratio is indicating that bears are about toovertake bulls.
3. The put to call ration has spiked over 1 on at least 4 occasionsrecently, indicating more puts then calls are being bought.
4. Between CNBC and Bloomberg you would think the world was comingto an end.

The rally will be a true stock pickers market (aren't they all?).There will be some opportunities both big and small. The main thingto remember is that you should not over stay your welcome. Stopsshould be tight and any sign of trouble in a stock you do have aprofit in should be taken.

Spend the next few days looking for fundamentally and technicallysound stocks. The earliest we could get a confirmation would beMonday assuming we don't undercut today's low. If you're stockbreaks out, make sure that it's on heavy volume and the relativestrength line makes a new high.

During the rally, if it materializes, make sure you don't forget tokeep an eye for potential short setups so you're ready to pounce theother way once the market starts to run into trouble. The next legor two will bring back memories of the 2000 - 2002 beat down. Idon't expect the bear to last that long or be as deep, but the lastleg or two just get ugly and if you're not short or in cash it willget painful.

On another note, the way large cap techs and telecoms have beenholding up indicates that they are finally ready to take back theirroles as leaders in the next bull market. Due to their heavyweighting in the indexes, I can say with some confidence that thenext bull market (not this mini rally) will take the NASDAQ over3,000 and DOW over 13,000 (by the end of 2007 at the latest).

Ready or not, the market will do what it has to do with or withoutyou. So do your homework regardless of market conditions so youdon't miss a beat when the market comes calling.

Monday, April 10, 2006

Stay the Course, Sell the Rally

If you're not out yet, make sure you're watching your longs. Eventhough on the surface it seems it's time to party like it's 1999 allover again, it is really just a matter of time before the marketrolls. All the indexes are being distributed on the way up. As crazyas that sounds, markets can and do top as they continue to movehigher. Earnings, I've argued all along, would be the catalyst to thestart of the selloff. The way the internals are acting, it seems themarket is saying the same thing. Then add rising oil/gas prices andinterest rates to the picture, and you have a recipe for a bearmarket. This is not a guess, these are all facts.

Sunday, March 12, 2006

Sell Sell Sell into any Rally

Markets do not top overnight and neither will this one. Any bounce in the market should be used as a selling opportunity. If you absolutely need to trade on the long side, then make sure it's a trade and nothing more. Be very diligent with your risk management. The more research I do the more convinced I grow that my change to a bearish stance will prove to be correct. The headlines continue to ignore the deteriorating internals:

- Leading stocks and sectors continue to breakdown.
- Short setups look better then the long setups.
- Recent breakouts are breaking down one by one.
- Stocks that looked ready to setup and go, have slowly been shot to death.
- Uncertainty continues to build about Iraq, Iran, economy, interest rates, oil, etc... If the market hates anything that's uncertainty. At this point nothing is for sure, and with an election toward the end of the year, it doesn't seem to be getting any better.
- Earnings are going to be a disaster, but hopefully companies will wash their earnings out so comparisons get easier. This is where I see at least one of the major legs down, if not the "ONE".

The market is in for a minimum correction of at least a month plus. Is there any good news? Yes. Large caps will finally lead the next rally. Since they make up the bulk of the indexes, a sustained move by large caps will provide the type of support that long lasting rallies need.

My worst case scenario, and the one I prefer, is for the DOW to undercut 10K, and the NASDAQ to undercut 2K. At this point I would give this scenario a more then 50% chance of happening based on the technical damage being done. Earnings most likely will be the catalyst to get us really going to the downside.

Keep an eye on the short setups and be prepared to execute. The market is due for a bounce in the short term and looks like it will.

As always do your own research to either confirm or counter what I see. If things change, you will all be the first one's to know. For now, I would be in cash and ready to get short. If the short side is not for you, then take a vacation

Tuesday, February 21, 2006


That's right, no one will believe it, but I'm changing my opinion onthe market from bullish to neutral/bearish. You may be thinking toyourselves how can he change his opinion as the DOW is making newhighs, and the NASDAQ and S&P are close to doing the same? Becausethe headlines tend to lead you in the wrong direction, marketinternals on the other hand, give you a clearer picture. I lookedover 2,000 charts last weekend and more this weekend, and what I sawjust looked bad. Here are the reasons for my change in opinion:

1. Leading stocks are breaking down.
2. Most of the leaders that are making new highs are doing it onlower volume or are going into climactic looking runs.
3. The majority of new stocks trying to breakout are failing veryquickly, or lack volume, or their relative strength (RS) lines arelagging.
4. The DOW is rising, but on lower volume.
5. The DOW is just not a leader that holds the market up for long.It is made of up mostly mature fairly priced stocks.
6. IRAN - This is the biggest uncertainty of them all!!! The marketwill most likely wait until at least March to see Iran's reaction tobeing referred to the security council.
7. Interest rates, even though they will stop after no more thenanother two moves, the ambiguity of the Fed governors is creatinguncertainty about the number of rate hikes to go. Again, we mayhave to wait to see how this plays out in the first half of thisyear.
8. Earnings - Well they were good, but revenues just disappointed,including forward guidance. It's a matter of time before thesecompanies throw the baby out with the bath water and wash theirearnings out. Second quarter earning's reports look set up forthat. This way, going forward, comparisons will get easier.

Unlike in December, there is just not enough underlying pressure tomove this market much higher. There is more downward pressure fromformer leading sectors such as oil, commodities, homebuilders, andetc... With their big moves the last few years, they now make up amuch larger percentage of the indexes.

I still believe the market may have another small push higher, but Iwould not stick around to see if the next leg down is a constructiveone. The next leg will get ugly as they will take everyone elsebehind the barn and shoot them. This will finally create the fearrequired to give us the big move.

Here's how we're and you should be handling this market:

1. Sell all laggards.
2. If you need to be buying, buy only the quality names, and stickaround only if they manage to hold their gains.
3. Any stocks that are still moving higher in your portfolio shouldbe held only as long as they continue to act technically right.
4. If the market starts to undergo distribution, it would be wise tomove almost completely to cash, if not completely.
5. Good time to be looking for shorts.
6. Start making your list of potential buy candidates once themarket gets going again. Update this list frequently.

From the research I have done, it seems that we are looking at aminimum of 2 - 3 weeks more before the market can right itself. Ifthe leg down I am expecting is really bad, it may take at a minimumof 1 - 3 months. About the typical length of a correction or bearmarket.

Tread carefully. I may be wrong, but the research says otherwise.As always, be prepared, because the market will do what the marketwants to do. Our job is to be ready to take advantage of it, orprotect our capital from it.