Tuesday, February 27, 2007

Correction Time?

I, GK, Promise to never, ever, make fun of Sir Alan Greenspan, ever again!!! Boy, if I knew the gods would react this way, it would have been praises all around in last night's article. LOL

What a day. Every time you thought the selling was done, they put more and more pressure on the market. As I said yesterday, sell offs come out of left field, and the perfect combination of sell offs (China), economic reports, FED statements, computer errors combined for an unabated day of selling. To me it just seemed like pure panic with extreme readings on almost every front. But that doesn't mean we're done. At this point sell rules must be followed. We were forced out of 3 positions today, and are now looking to potentially exit the rest. Plenty of times during the day I thought of dumping (I wish I did), but I never imagined the extent of the selling.

So what to do now? If the market starts down, don't panic right away, give it a half hour to an hour to see if some kind of rally develops. Depending on the strength of the bounce you should definitely consider selling your laggards and losers. If the bounce continues, hold on to your strong stocks and see how well the rally goes over the next few days (assuming a bounce is coming). Look for potential shorts, but don’t initiate just yet, even if the selling continues, as any snap back rally will be hard and fast and will most likely run your shorts in. Enter the shorts after a weak multi day attempt at a rally starts to fail.

Good luck tomorrow and the rest of the week, it should be an interesting time.

As of this writing China was trying to rally, it would be crazy, but not out of the ordinary with this market, to give us everything back. Wishful thinking, but easier on the heart with happy thoughts. LOL


Greenspan speaks and everyone runs for the exits? Too bad the overall market didn't agree as it sold off on lighter volume. In fact the leading stocks held up great. Wasn't he also the man who called the market top four years before it happened? Remember, "Irrational Exuberance." Plus, he didn't say we were going into recession, but after such a long run, we're bound to be closer to one then farther. But isn't that what they've been saying about the market? Just because we've gone up for so long we MUST go down. Wouldn’t we find the possibility of a recession a good thing as it would force the FED to lower rates stimulating the economy and avoiding the recession? Oh no, then we would still be going too long without a recession. But then that means that the economy is reaccelerating and the FED will not act or raise rates. But that would slow down the economy, forcing the FED to cut. Great!!! NO? Confused yet? Good, that's the way they want you to be. But when the vote was in, the market once again voted for a continuation of the bull. Plus, when you get CNBC running segments on preparing you for the bear, we can't be at the top yet. Or can we? Who knows, just watch the markets, not the mouths of the pundits.

Wednesday, February 14, 2007

Stay Strong, Stay Bullish

I'm bullish, I've been bullish, and will continue to be unless something material changes, like more distribution of the market. There is no reason to go bearish, even though there have been a few days recently that would differ with me. The main problem is that they had to throw every piece of bad news , inflation, oil, Iran, interest rates, earnings (MU), the length of the bull run, and anything else they could think of within the same day to get the market to sell off, otherwise, the market doesn't budge to the downside for too long.

The market is simple, it turns when most least expect it too. For the last few months all we've heard is that the rally has lasted too long by historical standards without a 10% or more correction. That's just a silly reason (I thought it was if we were over/under valued). Plus, didn't anyone notice that the NASDAQ corrected 15% from May - July, the DOW was down 8.5%, and the SP500 was down 8.1%. In some circles the 15% correction in the NASDAQ would have been considered a bear market. And the 8%+ corrections in the DOW and SP weren't 10%, but it was close, and it was ugly. To me this all mean that most have stayed on the sidelines and have been waiting for another correction. Doesn't anyone pay attention to CNBC or Bloomberg, every commentator and interviewee talks about (the length of the bull, silly people trying to protect their behinds). People are pessimistic not optimistic.

Having said all that, I wouldn't get too aggressive initiating new longs. Buy only the highest quality. The next move up will be fast and furious, DOW 13K should be a shoe in (2% away), new all time highs on the SP should occur at the same time. This is a time to look for add points on positions you've already held, and to look for sell signals as they rally.

Why look for sell signals if I'm bullish? Like I said, the market turns when you least expect it. If the DOW is going to reach 13K and the SP new all time highs, you will hear nothing but good news exciting investors and temporarily relieving there angst over the length of the bull run. That's when you expect the next correction to happen. Of course, just don't sell because of that, look for the signals on your stocks and the market.

There are two catalyst coming up that could add fuel to the market or end the euphoria fire started today on inflation and interest rates by Bernake's speech. PPI on Friday and CPI next Wednesday. If those two numbers confirm a slow down in inflation, as they should, then we should see some fireworks. We will also be past options expiration week, which should take pressure off the downside to keep stocks below their biggest strike prices, because who buy puts, everyone loves calls.

For now, stay long, but cautious. Don’t take anymore risk then necessary. Let the market get excited then look to take profits. If the market experiences more heavy selling on heavy volume in the next few days, then I would consider cash. But if we get through this week without distribution, then we have some room to breathe as far as how many days of selling we can take before moving to cash.

Anyone else being bored to sleep on most days by the market?

Thursday, February 08, 2007

Cramer Pops the Stock Market Bubble

TheStreet.com: The Winners of the New World

Look how bullish he was at the end of February 2000.

NTRI - Short

Below is a chart (click to enlarge) of NTRI. I found this short setup a few weeks ago but did not act upon it because the market is still in Bull mode. But you can see how even fantastic earnings(see left bottom of chart) is no reason to hold onto a stock as it displays numerous sell signals.

Wednesday, February 07, 2007

PETS 2005 - 2006

It is always important to review your winners and losers. Below is a chart of PETS, a trade we were in from 2005 - 2006 (click on the chart to enlarge it). Ignore the data on the page, as that is current infomation and does not reflect the data present at the time of the trade (I don't have anything available to rebuild that information from the past).

Tuesday, February 06, 2007

Boring!! Getting Sleepy!!! But Excited!!!

This market should be bottled and sold as sleep medication. This type of action is more indicative of a rally coming then sell off. Markets have several ways of bottoming, and boring action for sometime, serves to, you guessed, bore out the remaining weak players. Just as capitulating action serves to scare the last weak hands out, as we saw two weeks ago. The bears needed to throw everything including the kitchen sink at the market to get it to sell off, and the market took no more then another day to shake it off. Typically bad news trickles in at a slow pace, driving the market lower, before being dumped on us in the worst case scenario forcing all to sell (capitulation). But we managed to get that action in one day rather then a few months. This strange action is indicating that the continuation of the bull is near.

CSCO reported a fantastic quarter even after being downgraded heavily by four analyst recently, and should light a fire under the markets a**. If they fail to provide the spark, then the CPI and PPI numbers next week should do it. They started the rally back in August, and should show inflation is cooling as gas and oil prices fell in January.

But I do have a feeling that the market wants to wait to options expiration next week, to keep all those CALLS out of the money.

If you're long, lose the laggards, and keep an eye on the winners. Look for secondary add points in those stocks, so if the rally does resume, you can get your capital back to work. There are still some quality names setting up in bases and worth considering. So do your homework and find them.