Sunday, December 19, 2010

Wednesday, August 18, 2010

Avoid The $Market - Yesterday's $Rally Nothing More Then A $Bull Trap

About the only reasons the market went up yesterday were its oversold condition, POT getting a bid from BHP (which was the only reason for the increase in volume in the market), and the FED pumping liquidity in from its POMO actions.  Otherwise there was nothing to get excited about as thin stocks and beaten down stocks and groups moved higher. 

Volume across the majority of stocks that could be considered leaders was extremely low.  Volume in the market rose only because of the enormous volume in the fertilizer stocks and related stocks.  We can argue it's August, but when they want to buy they buy.  It would have been more impressive if volume would have risen minus the extraordinary volume in the Fertilizer and related stocks.

Maintain cash levels and look for shorts.  If you don't short, go on vacation for the rest of the month and maybe beyond.  Too soon to look out that far, but it doesn't look good.

Good Luck

Friday, August 13, 2010

Sell $Stocks and $Market Into Strength

The underlying leadership suffered a significant blow this week.  Without a miracle here, and I don't expect one, the market is poised to test the July lows at a minimum.  There is no need to hold anything long.  It would be like trying to find a needle in a haystack, to find the one or two stocks that might buck the market's trend.

Wednesday, August 11, 2010

$Cash - Continue to Recommend Cash

Since the start of the rally it has been hard to get bullish even though there was evidence of a possible start of a tradeable rally or even a bull market.  But the entire time, my model refused to go to a buy signal.  Generally that has meant that unless you are really nimble, you're best position is in cash.

The market continues its main theme, following the Euro/Yen conversion.  As long as we stay correlated to the Euro/Yen we cannot expect the market to have its own mind.

Today's action is very worrisome.  Not because it is a big down day on heavy volume, but because the market cannot keep up with the mini bounces in the Euro/Yen conversion.  The last time we saw this action the market made new lows.  So the market and the Euro/Yen conversion are now at even more critical levels then before.  If  today's or this week's  lows cannot hold over the next week, we will most likely test the year's lows at a minimum.

Stay in cash and be patient.

Thursday, August 05, 2010

Remain in $Cash - No Need to Gamble Ahead of Tomorrow's $Job Report

Market continues to muddle at a critical level.  With tomorrow's job's report looming, any longs or shorts ahead of it would be nothing more then a spin of the roulette wheel bet.  Irregardless of the number, whatever direction the market chooses to take tomorrow, there will still be plenty of time to participate on either side of the trade. 

I've personally been taking some well needed time off, peaking in from time to time of course.  So stay patient and prepared.  With the summer doldrums upon us, you might be well served in joining me on a mental retreat.  Whatever you miss in August, is generally more then made up for in the fall.

Thursday, July 29, 2010

$Cash Remains The Best Position in the $Market - Careful of the $Bull Trap

While I continue to monitor for changes in the trend, I believe that cash is the safest play.  As much as I'd like to believe the action in the leaders, I have alot of  suspicion and for good reason.

Most leaders have only been able to muster one good day since the follow through.  Many came on below average volume, while the one's that did have strong volume, failed to follow through with more volume over the following days.  Most breakouts have been retraced in almost all of the leaders and are on the verge of failing.  They need to hold or failure will be the next step.

As I noted in my Monday blog, the market had reached an area where failure or a shakeout was extremely likely.  It did not take to long after the post for the market to stall and reverse.

Right now it's best to continue to maintain watchlists and monitor leaders from a distance.  With next weeks big job report, there might just be too much uncertainty ahead of it.  I would not expect the market to do much ahead of the report.

With the slow summer trading ahead of us, the worst case scenario is for the market to keep drifting up in the face of low volume.  9 out of 10 times this has led to a major Bull Trap.  So let's get a nice quiet pullback over the summer and setup for something big in the fall.

If you're into shorting, there are now a good amount of setups that are ready to break if the market heads down.

Tuesday, July 27, 2010

Stay Patient... $Market Still Needs to Prove Itself

Market at a critical point.  At this level the market will need to prove that it can take out the June highs and hold them.  Historically this would be the area where the market starts to distribute for a second leg down or major shakeout.  So if you're still not long, you'll get your chance.  Right now it's hard to tell if this is a bear market rally or the real deal.  The many breakouts point to the latter, but there is still a question of volume on many of them.  Historically markets have presented multiple entries into a real bull.  So stay patient and don't over commit...just yet.  My models still have this market in the neutral zone.  That could change this weekend, but we will need to see the volume come in.  I would remain mostly in cash and cautious.

Wednesday, July 21, 2010

No Place Like $Cash

There is no reason to be a hero in the market.  Essentially the only reason to hold positions is to bet on the outcome of an earnings report.  Besides that, there are almost no good reasons to own stocks right now.  Everything is wide and loose and failing by the day.  Sellers are using good news to sell and bad news to sell.  Not the type of enviroment long positions thrive in.  Best to be patient and wait for the next opportunity to setup.

Tuesday, July 06, 2010

Patience - Not The Right Time To Buy Back In - Cash is Still King

As great as today may seem on the indexes, there isn't much follow through on the few leaders that have held up.  You'd like to see at least one or two stocks attempt to breakout and hold those breakout levels.  While this can still happen today, the market seems to be working off the excess sell off it experienced over the last two weeks (buy the rumor type buying ahead of the European bank stress tests).

After completing my markets model this weekend, I have no hope for a new rally beginning this week.  Too much damage has been done, and too few leaders are left in tact.  I would advise most to stay in cash or short if you know how, but do not initiate long positions.  There will be plenty of time when the time is right.

The downtrend in the Euro/Yen conversion still dominates the market.  Until we decouple we will have a hard time rallying.

For now just take a break but continue to work on your buy list.  It will be frustrating as a day like today will make you feel like you've missed something.  Don't worry, you haven't.  Another point of frustration will be when the stocks on your lists that look promising breakdown and you'll have to start from scratch.  That is all a part of a bear market.  The good news, if you keep up, when the timing is right, you will be prepared and the first one out of the gate.

There isn't much to write about these days so I will post when I feel something is relevant.  Hope everyone enjoyed the long weekend.

If you want real time updates, follow me on Twitter,, or sign up for the free newsletter on, and you will receive all the updated content the next morning.

Wednesday, June 23, 2010

Time to be Moving Back To Cash

Draw Your Line In The Sand - Place Stops To Protect Profits or From Losses

The market has provided us with the perfect line in the sand today.  Considering the intra-day volatility I would use today's lows as a great place to stop out positions.  If this is a tradeable rally, we should be able to hold these lows.  If not, the rally could be dead in the water.  We undercut the follow through day lows on all the indexes, except the DOW which missed by about 30 points, and that statistically leads to failed rally attempts the majority of the time.  They don't always fail immediately or fail all the time, but you need to proceed with caution here, or risk significant losses.

If $Market Can Hold - Long Swing $Trading Opportunities on the Long Side

Stick to the names everyone knows:


There are others, but too much going on to list.

Keep your stops tight.  If market fails to hold it could get ugly.

Good luck


$Market & $Euro At Critical Support Levels That Need To Hold

Monday, June 21, 2010

The Intra-day Volatility of the Euro Wreaks Havoc on the Market

Right now all that matters is what the Euro does.  Regardless of any good or bad news, once the market opens, it takes it cue from the Euro.  The good thing, the Euro on a daily chart looks like it wants to head towards its 50DMA.  That should bode well for the US stock market.  So even though hour to hour the market is gyrating, keep an eye on the Euro's daily chart.  That will keep you from panicking.

Thursday, June 17, 2010

Leaders are Acting Just Fine - Do Not Panic Sell - SNDK Reviewed

This market continues to be all about the Euro and The Headlines.  If you can't handle it, then you should be in cash.  Otherwise, the majority of leadership is acting fine and were due for a pullback.  If you were impatient and chased stocks, then you are probably feeling some pain.  If not, then make sure your stock is acting the way it is supposed to.  That includes pullbacks to levels of previous support or resistance.  Stocks do like to retest these areas, in many cases, before moving higher.

Lets take a look at the chart of Sandisk(SNDK) below.  The stock has been one of the best leaders of the entire rally.  It has continued higher even as the market has struggled over the past two months.  But it too cannot resist the gravitational pull of a market pullback.  So everytime the market enters a correction or pullback so does the stock.  But, as can been seen on the chart, SNDK maintains it's uptrend and finds support along its respective moving averages (green arrows).  As long as it maintains this character or does not exhibit some other sell signal it has to be held.  So a pullback into the 42 - 45 range (red circle) would be perfectly normal and acceptable.

Wednesday, June 16, 2010

Strong Breakouts and Leader Action Confirm Power of the Rally - Bullish

Look for tight action and pullbacks to enter long positions.  DO NOT CHASE!!!  Headline risk still a major problem for the market.  So use caution, but be patient.  NASDAQ currently stalling near 06/03/2010 highs.  Next level of interest will be the 50DMA.  Leadership will be narrow but obvious.  So go after the leaders known to the market.  New leaders should be exceptionally strong fundamentally to be considered.

Tuesday, June 15, 2010

Leaders Finally Acting Like Leaders - Unlike this Morning - Bullish

Don't Be Afraid to Trade The Long Side - Just Keep Stops Tight - Bullish

If the day continues, as is, we will get a follow through on the NASDAQ composite.  That would signal a confirmation of the rally attempt.  The only problem, the market is glued to the Euro and the headline risk associated with it.  If you compare the NASDAQ to the Euro, the two charts are identical.  Both look like they want to at least rally into their respective 50DMA's.  That would provide for some excellent swing trading opportunities, on the long side, in the already known leaders. 

But, until the market can stop trading tick for tick with the Euro, holding positions for too long will be too difficult.  If you don't mind swing trading, have fun with it.  If you're a more conservative investor, and the rally goes on to work, you will have ample time to participate.  For now protect your capital at all costs, even if it means you are under invested early.

Right now I am still on the long side, but with stops very close by.  I'd rather get stopped out and get back in, rather then lose profit or capital.  I do have a list of shorts, and if the opportunity presents itself will take the trades.  But even on the short side, profits have to be protected quickly.

The market is in uncertainty land and that's where it confuses everyone.  So either trade or stay in cash.

Good Luck

Use The Strength to Move to Cash - Too Much Unhealthy Action - Bearish

Caution is advised - Tighten Stops and Let The Market Move you to Cash - Bearish

The markets erratic behavior continues and this is bad news for stocks.  Right now the market is being driven purely by the movement of the Euro, which is a huge negative.  Unless you're willing to day/swing trade this market, your best place is to be parked in cash.  Otherwise watch your stock closely during the day and don't hesitate to punt if the Euro goes into another death slide.

Friday, June 11, 2010

Leadership Continues to act Well - Look to Buy- Bullish

Keep stops tight in case of a curveball.  Leadership held up strong over the last few days and during this mornings sell off.  They are also much more reactive to moves up then down.  This is the opposite of the last few days.

Leadership Stocks Showing Alot of Power Ahead of the Market - Bullish

Keep Your Eyes Open for Possible Long Entries

Don't get too invested, but if the market starts to turn positive one or two small positions will not hurt. Leadership has continued to hold up in the face of all the bad news and has now started to tighten up. Make sure to keep stops tight on any new buys just in case the market throws us a head fake. We will continue to monitor the long side until we finally see the leaders breakdown hard. Currently most should still be in cash.

Good Luck

Monday, June 07, 2010

No Need To Be a Hero

At this point you should be out of most, if not all of your long positions.  If you've held a stock for a very long time and it is still acting well that is a different story.  Probably, most got into the market recently just before or after the follow through day, and just don't need to give back more money then they have to.

What looked like a promising developing rally has turned into a big fake out.  As I stated in my friday blog, the combination of a day 2 distribution day and a close below the follow through day's low, is a deadly one two knockout combination for the market.  The lesson here for most is, when a market diverges from a precedent, you need to go on the defense quickly.  Hesitate, and it could get REALLY ugly.

This looks like it could be the third wave down of the first leg that started  04-26-2010 which generally is preceded by another rally attempt, of several weeks, that sets up a second, multi-wave, leg down.  Those rallies can be profitable as the market attempts to rally back to a key moving average.

I'd say to avoid the short side for those not able to monitor their stocks intra-day.  The setups that are out there may be good for a few hours or days, but need more time to setup the ugliness of a continued to downtrend.  So if you can't trade them, avoid them. 

Stay patient and keep your lists fresh.  You never know if the market has another diverging idea :o).

Friday, June 04, 2010

Cash is Now KING

If this turns out to be a shakeout I will be very surprised.  With an undercut of the follow through day lows and high volume distribution developing on the indexes so close to the follow through day, both of which have historically led to rally failures, you should be moving to cash. 

I drew my line in the sand at those lows and have now moved almost to cash.  I still have some early buys acting well, but the line in those stocks is now drawn too.  No need to give up all the profit.

Today should be a lesson in how quickly one must act in the market, especially aggressive investors.

Back to the drawing board.

Watch The Follow Through Day Lows

A violation, especially a close below the follow through day lows (NASDAQ - 2210.07), historically leads to failed rallies and a retest of recent lows.  Depending on when you positioned yourself in this rally, you have to make a decision on whether to try and hold through that test or move to cash.  The conservative play is to move to cash.  Many leaders are holding well, but that can end very quickly.

Look for Pullback Entries If Market Holds...But Keep Stops Tight on New Buys

Stay Patinet...Leaders Holding...Set Stops & Let Market Do The Work...Just Don't Panic

Wednesday, June 02, 2010

NASDAQ Follow Through Confirms Rally - 2007 Precedent Intact

The 2.64% move on the NASDAQ, on higher volume then yesterday, confirms the current rally attempt on day 5.  Two new breakouts, VIRL and THOR, joined the ranks of breakouts.  Further adding confirmation to our bullish stance since the market reversal on 05-25-2010.

Yesterday's sell off back to the 200DMA acted as another great shakeout. If you look at the 08-2007 chart (below) alongside the current NASDAQ, you'll see that the NASDAQ had a similar shakeout back to the 200DMA the day before the follow through day on 08-29-2007 (Black Arrows).

In the current environment you have to be looking to buy pullbacks as they start to turn up. Shakeouts after breakouts have become commonplace.  If you do buy a breakout, you might consider taking a smaller position and wait for the pullback to add.

Continue to keep in mind that this will be more of a tradeable rally then the start of a new prolonged move higher.  Stick to buying the high relative strength names with a proven track record of moving (APKT, NFLX, VMW, SNDK, AAPL, CSTR, ASPS, ISRG, etc...).

The market won't make this leg too easy.  Expect more shakeouts along the way.  Figure out your uncle points ahead of time and place your stops.  It is too easy to let a stop slip when they are held mentally. 

Stay calm and patient, and don't let those greedy emotions get the best of you.


Thursday, May 27, 2010

Bullish Conviction Grows Stronger

We're only 3 days off the bottom, but my bullish conviction is getting stronger. Yesterday served as another good shakeout. On the surface it seemed extremely bearish as the market reversed big early gains into losses on heavy volume. But there was one important detail that most missed. Even though the market had reversed, many of the leaders held strongly and closed positive. They did close well off their highs, but as the market started to sell off, the leaders refused to budge lower for quite sometime. In the past few weeks, my entire leadership list would have turned entirely red in that type of action.  Which made me believe that the sell off was more headline driven then real selling which I warned about in my last market update.

Obviously today confirmed my thought process. Between today and yesterday we have seen a number of fundamentally strong stocks breakout to news highs and bounce off their 50/200 day moving average on strong above average volume (APKT, VMW, SNDK, IPXL, SXCI, etc...). Pullback bases are plentiful and most are in a position for early entries and breakouts(AAPL, CREE, LULU, CRM, etc...).

There is no need to rush and get overleveraged (determine your own risk appetite). If this market continues its current action, you will have plenty of time to take advantage. What's most important is that you DO NOT CHASE or you'll risk getting shaken out by a normal pullback. Shakeouts in stocks and markets have become more common place then in the past.

As I stated in my last market update, Market Action Very Similar To 8-16-2007 - Bullish - Updated - NFLX, APKT, SNDK , I believe that this will be the most profitable part of this rally.  It is important to keep in mind that you DO NOT want to get into a buy and hold mentality when things get real good.  Buy only stocks with the strongest fundamentals that have already proven they can move and held up strongly in the face of the NASDAQ's 15% swoon.  This is what I call the "DUH" part of a rally.

Once we get a follow through day, my market tops analysis will be back in play.  Its had an almost perfect record of getting us out on the way up before any real damage could be done to our capital.  Sure it misses some of the final gains, but how would we know to sell at the peak anyway?

Stay patient and get your research done so you are prepared.

It is amazing how everyone views the market differently.  This afternoon, a CNBC guest stated that if we were to top now, this entire rally from March 2009 would have been one of the weakest in history.  How a 100% move by the NASDAQ and multi 100% moves by leading stocks is the weakest in history is beyond me.


Wednesday, May 26, 2010

Capitalist Bull Quoted in Investor's Business Daily - Potential ETF Leaders In A New Rally

I am quoted in this Investor's Business Daily newspaper article...

Potential ETF Leaders In A New Rally

Market Action Very Similar To 8-16-2007 - Bullish - Updated - NFLX, APKT, SNDK

Below is a snapshot comparing the 8-2007 NASDAQ to the current NASDAQ (green arrows represent the the two positive reversal days). As you can see the market managed to rally quite significantly off that turn around to new highs. That was the most profitable part of the rally for swing traders.

Do not look for new leadsership to emerge, even though some are bound to show up. Look for stocks that are already proven winners, have exhibited high relative strength during the correction, and are must owns for institutions that must be 100% invested (click on charts below).

Don't allow your mind to convince you that we've entered a new buy and hold period. At best, if this rally attempt holds and we follow through, we're looking at a 1 to 3 month rally. It'll get easier to tighten up that time frame once we really get moving.

Don't panic and buy blindly.  If August of 2007 is any precendent, we should get more setups over the next few days and weeks.  Definately dip your toes in and add as new opportunities present themselves on pullbacks or base completion.

Headline risk out of Europe and Asia will keep the volatility high, so be vigilant with your stops.  You're going to have to endure it to some degree if you're going to maximize your returns. 

Ultimately we're still waiting for a follow through day to confirm this rally.  So any buys before that are high risk, but also carry a high reward.

Good Luck

I alerted readers of this blog early yesterday to the possible turn around.  If you want real time alerts and updates, sign up at Twitter and follow Gennady17.  Sign up for the FREE newsletter at Capitalist Bull for a daily digest of the blog's activites (don't forget to look for a confirmation email).

FD - Long APKT and NFLX

Stocks End Mixed After Big Turnaround -

The S&P 500, NYSE composite and Dow undercut the lows of last winter's correction. But indexes rebounded and the S&P closed with a fractional gain. The Dow dipped 0.2% and the Nasdaq 0.1%. The NYSE closed practically unchanged.


Tuesday, May 25, 2010

Market Action Very Similar To 8-16-2007 - Bullish

If you compare the charts, this day was very similar to that day and period.  A gap up tomorrow would confirm it.  We did get setups over the next 4 weeks back then before the market really launched into its final run.

Market Presenting Some Excellent Intra-day Entries

Stocks Stumble As European Concerns Still Linger -

The stock market resumed its losing ways Monday as the European financial crisis continued to weigh.

The NYSE composite tumbled 1.6%, the S&P 500 1.3% and the Dow 1.2%. The Nasdaq fell 0.7% as late selling sealed the index's loss. All major indexes closed near session lows. Volume was down sharply from Friday's options-expirations pace.


Tuesday, May 04, 2010

Patience...No Need To Panic Buy...Yet

In my April 14th blog entry, Don't Chase The Market, I wrote, "Based on model studies most of the stocks will pullback at some point and most will be buyable right around this range".  In my April 12th blog entry, The Market That Won't Pullback, I wrote, "Unless we're going climactic, I can almost promise that you will get a chance to buy most of the leaders that have been moving higher at or near current prices after the next pullback".  The reason for both entries, "I found overtime that it is easier to deal with missed profits then with lost profits.  If you're sitting in cash and waiting for the pullback and are ready to pull the trigger, it will be easier to do so.  If you're invested and have to sit through a pullback, even though you may understand it is normal, your EMOTIONS DO NOT.  They will force you to run for the exits just as you should be ready to add more."  So here we are almost a month later and most stocks are right around the range they were about a month ago.

Just like death and taxes, pullbacks in the stock market are inevitable.  Patience to wait for and during them is another story.  If you did manage to wait, you are most likely extremely antsy to buy right now.  After all, you either missed or did not profit as much as you would have like too in the previous rally.  So you don't want to make the same mistake again and are ready to pounce on the first pullback.  But I say wait.

The market and it's leading stocks are only in their first two weeks of the correction.  The volatility day to day is a bit too day up big followed by one day down big.  Headline risk from Europe and Goldman Sachs add to the uncertainty.  It's a rollercoaster ride you do not want to be on.

The game plan right now is to build a watchlist of stocks you are interested in buying.  Try to identify the type of pattern the stock is forming and how much more time it needs to complete the pattern.  Then determine what you would want to see, preferably based on previous model studies, in order to begin entering the stock.  This takes away the risk of randomly buying and selling, which often leads to churning.

Based on the current action of the leading stocks, we have at least another 2 - 3 weeks of sideways to downward action before the rally can resume.  Some stocks are further into their consolidations and could be buyable earlier.  For now I would stay away from buying anything and focus all my efforts on research.

Side Note

If you have been holding a big winner for sometime and the stock is acting fine, there is no reason to sell.   Swing traders on the other hand need to be flat on the long side.

Friday, April 23, 2010

Don't Even Think About Shorting

Some of my readers have asked if they should look to short this market.  NO, NO, NO...Even though the market  has shown signs of a possible upcoming pullback or correction, you don't want to mess with this brake less locomotive.

Each night I look at my short and long screens.  I have found that, and this has been pretty common for some months now, short setups tend to break up, not down.  Or they will start to breakdown and squeeze hard over the next few days.  This is not the type of action you want if you're considering a short trade for more then a few hours.  In fact this is the only reason that I have continued to take long trades even though it seemed on several occasions the market was ready to correct.

Even if I knew the market was going to go down tomorrow I would not attempt to short for more then a day.  The bulls just have too much power right now to warrant the risk/reward.  The short side will be no different then the long side eventually.  You will see plenty of setups and evidence that it is working.

On the long side I continue to trade.  I do not want to get caught over invested.  If the market keeps rising I will participate as a swing trader.  Most of the stocks I'd like to own are just too extended to take long term positions.

Questions, comments, and suggestions always welcome.

Good Luck

Monday, April 19, 2010

$PETS Trade Reviewed 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 left side of the page.  That was the data at the time the snapshot was taken 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).

Comments and Questions Always Welcome.

Friday, April 16, 2010

$IMAX - Sell Signal

IMAX has been a big winner in this rally.  But it seems that there are quite a few offensive sell signals (click on chart to enlarge) that dictate that it is time to protect your profit.  If you've recently entered the position, I'd be very vigilant with the stock.  If you were lucky enough to have bought the stock early, you could try and hang on for a possible second climax move.  But you'd probably be better off protecting yourself now, and re-entering later, since the second climax is not a sure thing and will need another few week to form.

Thursday, April 15, 2010

$NTRI - 2007

Here is a an article I wrote about NTRI in 2007.  Even during the best part of a bull market, a stock with fantastic fundamentals could top and head lower.  This is a good lesson why not falling in love with a stock is EXTREMELY important.  They can top at anytime.

Wednesday, April 14, 2010

Don't Chase The Market

If you're still sitting out, the pain you feel is becoming unbearable.  You're ready to buy something just to feel better.  Well, don't do it.  Chasing many of the extended leaders is a high risk proposition.  Based on model studies most of the stocks will pullback at some point and most will be buyable right around this range.

So then why wait you ask?  I found overtime that it is easier to deal with missed profits then with lost profits.  If you're sitting in cash and waiting for the pullback and are ready to pull the trigger, it will be easier to do so.  If you're invested and have to sit through a pullback, even though you may understand it is normal, your EMOTIONS DO NOT.  They will force you to run for the exits just as you should be ready to add more.

I continue to swing trade this market and protect my profits and risk vigilantly.  I do not want to get or be fully invested just when the sellers and buyers decide enough is enough.  Stay patient and don't let those emotions get the best of you.

Comments always welcome...

Monday, April 12, 2010

The Market That Won't Pullback

We have seen quite a resilient market.  Considering the low volume in the market and on stocks, you would have expected some sort of pullback already, and yet both keep pushing higher.  It seems the sellers are holding out for more volume, because when they do come in from time to time, there is generally a very hard reaction.

So what if you've sat this one out?  About the only thing you can do at this time is to take multi day swing trades and patiently wait for the next pullback opportunity.  Is it possible this market just keeps going...sure.  But you will get rotation amongst the leaders pulling back to their 20 or 50 dma's.  Otherwise the risk is too high to enter the majority of stocks at this point to hold for an investment.

Unless we're going climactic, I can almost promise that you will get a chance to buy most of the leaders that have been moving higher at or near current prices after the next pullback.  Except you won't have to sit through the eventual pullback.  Now the only question is, will the next pullback be buyable?  Only time will tell.  I do know one thing, it will be at the worst moment when the best opportunities will present themselves.

Monday, April 05, 2010

A Bull Trap Setting Up or Setup

If you've been following my tweets, you know that I've been quite cautious with this rally most of the time. But, 2 weeks ago it seemed the market could sit around and consolidate into a new strong move, but that doesn't seem to be the case as of this weekend. I do expect the current tightness to resolve to the upside first, but would not be surprised to see sellers come in within the next week or two, if not few days. So there could be big trading gains to be had, but they need to be protected. So why the change of stance?

  1. Low volume - leading stock have been drifting higher in low volume for the past few weeks. Some will argue that it was due to the upcoming holiday weekend, but I've found historically that that excuse tends to be more of a trap then a valid reason.
  2. New bases are either too wild, have extremely low relative strength, or very late stage. The argument here could be that new leadership is setting up, but you generally want new leadership to setup during corrections and pullbacks not while the market has already made a significant move from the lows, and the late nature of the other bases tends to be failure prone.
  3. Many leaders have exhibited mini climactic action. Keep in mind, climactic action is not always obvious on the charts. But pay attention if you're stock has had any type of unusually large spike on heavy volume that would be out of the norm for the stock.
  4. There have been a bunch of attempted breakouts that have come on low volume and others are failing or have failed pretty quickly.
  5. Markets and stocks have been acting extremely erratic intra-day. In many cases stocks are round tripping there moves 2 to 3 times a day. This type of action tends to be more indicative of distribution.
  6. Market is heading into overhead from the 2006 - 2008 rally. Again one can argue that it doesn't matter anymore because of the time that has passed. But, the market fell and then rose so fast, there might not have been enough time to shake out the weak hands. Usually such severe bear markets are followed by mild bear markets, and we did not get that this time. So there could still be a large overhang of supply (but this is just opinion).
  7. The rally off the recent lows has had very little participation from your traditional fundamentally strong stocks. Now sometimes it does take up to a month plus for stocks to get going, but the above points kind of invalidate that theory.

Right now my game plan is pretty simple. I won't defy the market. But I have tightened up my stocks and will take only the trades that do not risk my other profits. Any large out of the ordinary moves by my stocks will be a sign to sell not cheer.

I've been through these types of situation before. They generally do not end well when they stop. Especially with recent purchases. So take it one day at a time and be careful.

Gennady Kupershteyn

Follow me on Twitter or Capitalist Bull

Tuesday, March 30, 2010

Market Readying for the Big Up Move

I can't find any reason to be bearish outside of saying that the market might have a shakeout before it runs. After another review this morning, many stocks have finally reached their 20dma's. Others have started to bounce off them. Some are starting to tighten around them, while others are somewhere between their 3rd and 5th weeks of consolidation to the 50dma. I'd bet this market is going to wait for the big jobs report on Friday and react to both the ADP (Wednesday) and weekly claims (Thursday). But the Friday jobs reports could be the catalyst. I don't see any reason why you should not start taking positions off logical areas of support now. I do believe if you were to wait for a little more of a confirmation from the market, mainly the leading stocks, there will still be some opportunities if not all the opportunities if there is one shakeout before we run. Otherwise about the only thing that derails this market now, is a piece of news out of left field no sees coming.

Good Luck

Gennady Kupershteyn

Follow me on Twitter or Capitalist Bull