Current Correction Market Stats

You wouldn't know it by the NASDAQ, but we're in the 4Th week of a correction on every other index.  The small caps are almost down -10% and all the other indexes, except the NASDAQ, are down 6%+.  One by one they have been hitting the leaders.  There is now just a handful that have not succumb to the selling.  The damage though is minimal on the large cap tech leaders.  Which plays into my theory that this is another correction (another nasty one, Feb/Mar, Aug/July, and now) on the way to the ultimate climax run to NASDAQ 3000 and China Olympics.

 

If I had to theorize on what is happening right now, I would say the market is selling off in anticipation of really bad investment bank earnings(they may be surprised or they may finally throw the baby out with the bathwater) and a FED(DEC 12Th) that will hold pat on rates in early December.  Once that news is out of the market's system, we could get the next leg up and refocus on the large cap technology leaders.  The market may even start moving higher before that as it has ahead of other major news events this year.  In either case, the market will potentially present better buying opportunities over the next few weeks.  For now, I would hold off from committing new money to the long side until we can rally in the face of bad news.

 

This will be fun to watch.

 

 

11/7/2007	Correction						Correction Levels
Index	52 WKH	Start	Length	Low	%		10%	15%	20%	25%	30%
Dow Jones Industrial Average	14,198.10	10/11/07	4.00	13,285.63	-6.43%		12,778.29	12,068.39	11,358.48	10,648.58	9,938.67
NASDAQ Composite Index	2,861.51	10/31/07	1.20	2,748.31	-3.96%		2,575.36	2,432.28	2,289.21	2,146.13	2,003.06
NYSE Composite Index	10,387.17	10/11/07	4.00	9,824.20	-5.42%		9,348.45	8,829.09	8,309.74	7,790.38	7,271.02
Russell 2000 Stock Index	856.48	10/11/07	4.00	775.37	-9.47%		770.83	728.01	685.18	642.36	599.54
S&P 400 Mid-cap Index	926.67	10/11/07	4.00	869.66	-6.15%		834.00	787.67	741.34	695.00	648.67
S&P 500 Index	1,576.09	10/11/07	4.00	1,475.04	-6.41%		1,418.48	1,339.68	1,260.87	1,182.07	1,103.26
S&P Small-Cap 600 Index	445.82	10/11/07	4.00	401.55	-9.93%		401.24	378.95	356.66	334.37	312.07

 

 

Fw: READ:My Take So Far

Outside some pullback plays, I don't really have anything solid setup (for the pullback plays to offer entries a correction would be needed).  Everything else is extended, including some that I would classify as pullbacks.  All this points to one of two outcomes.  Another surge higher, but not much since everything would really become overextended (correction would be sudden probably wiping out any gain from this point), or a continued pullback that started last week on the NAS & 2 weeks ago on the other indexes.  In either case, I do believe that all or mostly cash is the safer bet (strongest stocks only if stocks are to be held).  Only another 99-00 type run would make cash to mostly cash seem foolish at this time (if I could predict that, I would be RICH!!  VERY RICH!!!).  Risks outweigh the rewards at this time in the general market.  My analysis of sell signals to buy signals has 56% Sell to 44% Buy (and getting worse as I get lower on the list).  Which is approx. the % split back in July (60% sell to 40% Buy) before the sell off.

 

PS

I personally moved to cash on Wednesday.  I will buyback if the scenario changes.

 

The Plan for the Week

An interesting has happened over the past week.  More setups on the long side have or are in the process of developing.  But, they still need a week or two to complete.  A good downward drift with a shakeout would be an ideal scenario for the bulls.

 

Typically the market tends to move counter overall trend early in the week and back with the trend in the latter part.  This doesn't happen 100% of the time, but enough to validate it as something to watch.

 

If we get a big sell off on Monday and Tuesday or either or, it could be an indication that the current leg may be entering it's panic mode.  On the other hand if the market attempts to rally, I would believe the second leg down will be more severe and ideal setup for the shorts.

 

Again, your positioning right now is more of a preference of aggressiveness then anything else.  Realistically we are still at the point where we should be on a yacht fishing.
 

Gennady Kupershteyn

Managing Partner

Caliber Financial Management, LLC

Fax:  201-701-0239

 

Terrible Market

On the surface it could be called a good day.  Underneath, it is anything but.  Here is my reasoning:

 

• Volume didn't edge out the day before.  We could argue it's only day two of an attempted rally but it was options expiration on top of a fed cut.  So if you take out the option expiration effect (about 25%), there was no real volume behind such a big point move.  Especially after the beating the market has taken on heavy volume recently.
• Most leaders didn't even do average volume the last two days, and many ended below there mid points Friday on a supposedly strong day.
• There is almost nothing setup to the long side.  Not typical at all of a market near a sustainable rally.
• Market has not been able to rally in the face of bad news.  The last two days had the market rally on a Fed rate cut rumor(Thursday Afternoon), then an actual Fed rate cut(purported good news).  We still need see how the market acts in the face of bad news.

 

The intuitions may finally be ready to take their summer breaks so the market should continue to drift upwards as we approach the end of August and Labor Day.  But that's not a reason to be long unless for a trade.  For now I see this as a better setup to find shorts then longs.

 

Just my opinion, I could be wrong, but I don't believe so.
 

Gennady Kupershteyn

Managing Partner

Caliber Financial Management, LLC

Fax:  201-701-0239

 

The Damage Board

Below is the chart I keep to track the current correction.  The end of this week will mark week 5 since we topped.  Most of the indexes, except for the SP500, NAS, and DOW have now reached the 10% correction level.  The SP500, NAS, & DOW are now 3/10th, 3/10th, and 1.5% away from reaching 10%.  Considering the market is at oversold levels and everyone was looking for a 10% correction, there is a good chance that a relief rally is in order.  The bad news, nothing really setup to the long side, so nothing to get excited about.  The good news, we need the relief rally to allow stocks to rebuild their bases. 

 

8/15/2007	Correction						Correction Levels
Index	52 WKH	Start	Length	Low	%		10%	15%	20%	25%	30%
Dow Jones Industrial Average	14,021.95	07/17/07	4.40	12,834.24	-8.47%		12,619.76	11,918.66	11,217.56	10,516.46	9,815.37
Nasdaq Composite Index	2,724.74	07/19/07	4.00	2,457.89	-9.79%		2,452.27	2,316.03	2,179.79	2,043.56	1,907.32
NYSE Composite Index	10,238.25	07/13/07	4.80	9,079.93	-11.31%		9,214.43	8,702.51	8,190.60	7,678.69	7,166.78
Russell 2000 Stock Index	856.48	07/13/07	4.80	743.39	-13.20%		770.83	728.01	685.18	642.36	599.54
S&P 400 Midcap Index	926.67	07/13/07	4.80	818.95	-11.62%		834.00	787.67	741.34	695.00	648.67
S&P 500 Index	1,555.90	07/16/07	4.60	1,404.36	-9.74%		1,400.31	1,322.52	1,244.72	1,166.93	1,089.13
S&P SmallCap 600 Index	445.82	07/17/07	4.40	394.83	-11.44%		401.24	378.95	356.66	334.37	312.07

Topping Action

This is what topping action looks like. One day/week the market makes you panic, the next day/week the market makes you feel all warm and cozy.

When I talk about topping, I'm never really sure how long it will last or how long the resulting correction from it will last either. But I do know one thing is for sure, this is not the time to be overly exposed to equities.

If you still have stocks acting well, then by all means hang onto to them, but keep a close eye out for any new or additional sell signals. If you're in cash, then just wait.

Even if the market were to follow through into a new rally this week, we would most likely be several weeks away from seeing a mass amount of breakouts develop. And any initial leadership would be narrow and limited in it's ability to carry the overall market higher. There was too much damage done during last weeks sell off to recover quickly from.

Good luck.

PANIC!!

Just read about anything and anyone who was bullish is now in panic mode. Even Cramer is looking for another DOW down 1000 point days. This will be interesting to see how it plays out. Or how fast it plays out.

The 90's changed the typical length of intermediate bull and bear markets. Are we potentially seeing the same thing starting with February? Obviously this isn't a call to blindly buy, but something to keep an eye out for, just in case it is.

Everyone is trying to do the smart thing, run for the exit as soon as trouble brews, but as we know, that's impossible for all of us to be that smart. The market can't work that way, that would mean we are in an efficient market that is always priced exactly right. So something is not right here. Either there is more retail participation then we know of or the smart money is really wrong. I doubt the latter is it, but we've seen some strange things in the last year.

Also, keep in mind that there is no uptick rule anymore. If I were still a day trader, I would have spent Friday relentlessly selling into the sell off to make a stock or two look really really bad. Day traders made alot of money in the early part of this decade doing the same thing with bullets which the SEC banned in 2004. But now without the uptick rule, as long as the shares can be borrowed, you can relentlessly sell on every down tick and keep pressure on a stock (basically bullets without the cost). Combine that with futures and ETF (which just another derivative product I've argued is going to screw the market at some point) selling and you have the perfect recipe for a CRASH (if not now, eventually).

Don't forget, you've got the perfect opportunity to analyze your past trades and learn from them. So you're a better investor in the next rally.

For now, stay in cash, and wait for the right opportunity.

Bullish Theory While Currently Bearish

Looking back about as far as IBD shows, only once did the market not follow through to the downside over the next week after such a big drop. Only the February romp was followed by an up week. That's the bad news.

But if this is just a continuation of the August 15, 2006 rally (this just theory, relax, but I believe it's possible, and we'll only prove it in hindsight) then this could just be another quick deep violent correction in the march higher. In the 2003 rally, the market experienced 8 pullbacks/corrections of 5% or more over anywhere from 2 - 5 weeks with the longest coming in the beginning and middle of the move. The deepest was 7.6% right in the middle of the move. The move came obviously after the 2000 - 2002 Bear Market, but the correction that preceded the move was 17.6% after the October 2002 Rally. The current rally that started on August 15, 2006 was preceded by a 15.3% correction. Both periods experienced extremely negative news; Iraq, al-quaeda, jobless recovery, high unemployment, coming out of a crash, deficits, etc...; this time; high oil prices, inflation, credit crunch, interest rates, terrorism, Iraq, Iran, al-quaeda, etc... You get the point. 1991 was another similar year of all out bad news and lasted about 1 1/2 years into 1992. 1995 - 1996 years the market moved for 1 1/2 years after the 1994 Bear. Which was preceded by the same type of up and down no progress market of 1992, 1993, & 1994 after the 1991 Rally, like we saw in 2004, 2005, 2006 rallies after the 2003 Rally.

So if the average length of a rally after a major correction/bear is about 1 1/2 years and my theory is true, then we are only in the middle of the move with the best to come. So the leaders that survive this current pullback/correction should be the big winners of this Macro Bull Market. We could continue to rally through the 1st quarter of next year with a few more pullback/corrections to go. But some stocks and sectors have topped (which is great for bear market short sellers, as it will take at least 5 months to setup the shorts), and the new and some former leading sectors are setting up and in a holding period for the next leg up. This would also work into my China Olympics Topping Theory, where the Chinese will slowdown and pound their chest more once they don't need to impress the world and keep it happy, right after the Olympics or World Expo.

We'll see, it would be great if I'm right, otherwise back to the drawing board.

I accept comments.

PS

Right now you should definitely be out of any stock that you are down on or barely made any money on. You can hang onto stocks that you have a cushion on only if they have superb fundamentals and great technical action (i.e. barely correcting considering the big down days and showed good volume on the run up with most new highs coming on higher volume). And don't forget to analyze your past trades and keep an eye on the market, you never know when we could turn higher, it only takes 4 days(I stole this one, IBD).

Goodnight

Market - Bull Bull Bull

This market seems ready to explode. The last seven days have produced an enormous amount of growth names breaking out (gapping out) on explosive volume with major price moves. A quick look at my screens reveals many more ready to go

With GDP so low, and earnings slowing only to high single digits, foreign markets are holding up the earnings of US companies even as the US economy slows. If the expectation of a reaccelaration of the US economy in the second half comes to fruition, then earnings may be much stronger then most estimates expect. The market maybe pricing these new expectations in now. Plus, with so much liquidity in the market, not much supply of stock, and high short interest and we are primed for a rally of mass proportions.

We've now entered the good new is good news, bad news is good news market. Goldilocks is be alive and well.

Time will tell. Good luck.

PS

Sorry I am so late with an update, but this market is keeping me busy.

BDC - Time To Sell?

Here's an example of taking your emotions out of the trade. BDC has been a great performing stock. It weathered the 2006 correction well and the Feb 2007 market break. If you're holding the stock, the temptation would be to keep holding. But some signs of trouble have popped up:

1. The week of 3/9/07 the stock made it's biggest point move in the entire run, including largest weekly and daily volume, and biggest daily point move on a gap up (exhaustion), potentially a climax run. Very subtle climax run, hard to interpret.
2. 3 of the last 4 new weekly highs (Past 7 weeks) have come on below average volume. The first time this has occurred in the entire run up. Last 3 days have seen the same action, new 52 week high's, below average volume, well below.
3. As the stock has made new highs in the last 3 weeks, the RS line has failed to confirm.
4. Sales growth has decelerated for the two quarters from 32% to 22% to 14%.
5. Earnings growth has decelerated for the last 4 quarters from 100% to 96% to 64% to 48%.
6. In the last quarter the # of funds owning the stock has dropped.

Now all this doesn't mean the stocks move has to end, but the negative signs are there, and warning that the risk/reward ratio is no longer favorable. My opinion, the stock is now a sell.

Let me know if you have any questions.

PS

Did I mention he's number one across the board in his group? They always look great at the top.

I Don't Like It - Cash Is The Way

I did not like the rally from the start this morning. Once I could see that it wasn't going to hold, I made the decision to move to cash. Even the bounce this afternoon was fishy as volume decelerated from this morning. There are several problems:

1. The market is uncertain about everything.

2. The markets rallied the 2 - 5% and stalled at their 50DMA as I thought they would.

3. Powerful volume breakouts failed to make similar price moves. (I know it's one week into a
rally, but at least some usually have powerful price moves.)

4. Other Breakouts were weak on volume or stalling.

5. With such a strong opening and no breakouts, that's a problem.

6. Leadership in the market is thin.


The major market averages will most likely try and test the 50dma ( 1- 2% higher from here)before going lower. Considering tomorrow is window dressing (quarter end) and early next week is a Jewish holiday, volume should remain light and the bulls should have their way. After that, I would get out of the sellers way.

If you're still long and are nervous, my advice is cash, no need to wait for the breakdown, or at least cut your positions in half. Never stay in a position when you're not sure what to do, it just leads to bad decisions. If you're a trader, look for shorts, next week should be the optimal time to start shorting (by mid week the latest). My short setups all make me feel that the market just needs to stay up for another 2 - 3 days, then they will be perfect (aaaahhh, nothing ever perfect in the market). Don't stop looking for longs either, we haven’t rolled over yet, the rally may still find it's footing, but I doubt it.


PS

I'll flip sides if I have to!!!

Hmmmmmm…

The market is tough. I've been convinced for a while that we were going to tumble further then the low set on March 14th, but the market followed through and confirmed the rally on March 21st. Since I won't argue or trade against the market, anymore at least, I had no choice but to sit in cash or nibble on some longs. I didn't want to sit on all cash, since the markets will do what they want, so I chose to nibble just in case my bearish assumptions were wrong. So far it has worked in my favor, but now not sure for how much longer.

The markets haven't acted badly since the follow through, up to today, where we got our first distribution day. Now it might be just jitters ahead of big economic reports tomorrow (anyone's guess at this point what the market wants out of them) or the weekend (Iran is out of it's mind and cornering itself to a point it may not be able to get out of).

I did have some breakouts today I did not take because volume was suspiciously low.

What to do? I'm going to watch the tomorrow very closely, if the action looks bad, I will most likely move back to cash and pull up my short list (which by the way has grown in the last two days). I will probably wait for next week to initiate any shorts as I don't want to be run in by an early rally next week if there are no major problems in the Middle East or elsewhere for that matter (rally may not happen, but want to remain cautious).

I know this makes me look like a flip flopper, but I'm a swing trader and need to adjust weekly, sometimes daily (which I hate, but have no choice), until I can see the true trend. How do I know it's a true trend? Breakouts/breakdowns hold their pivot points and continue to follow through before their first major pullback. So far, that statement holds true on the bull side. The problem, the number of leaders (breakouts) is still scarce.

All I can advise at this point, keep doing the homework. When markets have no clear trend, it's better to sit in cash or do as much work as possible so you're not caught with your pants down. Once a trend is developed and you're on the right side, you can take a breathe or two, but never for too long.

GOOD LUCK and buy a lot of Excedrin tension headache pills if you're trading.

Random Musing:

If Iran is truly cornering itself with a confrontation with the West, the markets will sell off as they usually do leading up to the boiling point. But, historically, when these confrontations come to a head (i.e. War), US markets start major rallies and not continue the sell-off leading up to the solution (if you want to call war that).

The Little Rally That Could

Chooo!! Chooo!!! I think I can, I think I can. The market is showing some resilience and new leadership is slowly taking hold. I spent a lot of time this weekend pouring over charts and found that the place to be is long. There was a sudden surge of setups that crept up over the last four days.

The only problem, most are kind of sloppy, but if you take out that one week disaster, the bases start to look much nicer. My long list went from none to a ton. I did have to do some work to weed out the few that were able to escape the markets beat down, and so far they have performed great.

Again, I have to reiterate my skepticism, but at this point I have dipped back into the long side today, and will continue to do so until signs of trouble emerge. I would have thought that by now some signs would have emerged. But outside of this morning's sell off, on low volume, which is great, the market itself has acted quite perfectly. And the recovery off the lows today came on a pick up on volume and the many new potential leaders that are on my list really picked up steam just before the market really perked up and exploded as the NASDAQ went positive.

With a quiet period ahead, we may be in for a nice little rally over the next few weeks with some powerful moves. I don't expect much more, but considering no one else does, maybe the market surprises us.

RANDOM MUSING:

I still hold my bull trap theory. Now that we got a correction of around 8%, the good move off the lows will serve to bring in the money that was waiting for the correction. The money that did not leave the market during the market, will stay put. The skeptical money will creep in as the market moves higher unabated (if that's the markets plan), and just when things start to look rosy, watch out. But for now, play it long, just look out for the subtle sell signals, I wouldn't ignore them. But they are hard to recognize, since you will be looking for the signals that reaffirm your bullish view.

I Can't Buy it or Ignore it

I don't buy this rally, just seems to quick for me. Lack of leadership is the problem. But that doesn't mean it can't develop.

Where do I stand? I haven't gotten short, it was too early for that, and didn't move completely to cash since I did believe a small rally would develop. Can't ignore today, we did get a follow through day, which confirms the rally.

For the rest of the week compile both a possible long and short list. My opinion was that the rally would carry to the 50 day moving average, which all the indexes broke above today. I was looking for 2 - 5% rally, we got 2% today. I think this momentum should carry a little longer. Then the market will most likely stage a sell off. The strength of that sell off, and the number of stocks that setup to break higher afterwards will be the key.

I wouldn't hold my breath, even though I was shown a chart that it is possible for the market to rally significantly from such a short correction. Even 2000 had a great bounce.

Point being, not the right time to do anything. Best to sit on the sidelines and prepare. If this is a real rally, you'll have the next few weeks to get long. No need to rush, this one, you can wait and see if it proves itself.

The Coming Bull Trap

OK, the market did what it had to short term, take out 12,000 and bounce hard. Now I believe we're going to get a 1 - 4 week rally ranging from 2 - 5% before the next leg down. We're in the last two weeks of quarter end, where news tend to be quieter ahead of earnings season. Of course there will be earnings warnings and economic data, but the market needs some relief after the volatility over the last 3 weeks, and a small relief rally would be just what the doctor ordered (a.k.a "Bear Trap").

Now having said all that, would I buy into the rally, NO. In fact, I would use the opportunity to move to almost 100% cash and wait for the opportunity to get short. If you're not a short seller then go back and review your trades from the bull market and prepare and keep a watch list for the next. Otherwise, you probably have a few weeks to take a breather.

Why am I so scared of the market, even if we get a follow through confirmation rally day? The politicians got involved in trying to calm us down. They seem to be trying too hard to tell us everything is ok. Not only domestic politicians but foreign one's. Now that's scary. I feel like something is about to give and global governments are holding on to the last fiber of a string about to snap. So prepare for more calming talk from the fed, white house, congress, and other foreign leaders. Then prepare to look out below if you buy into it.

Does this have to turn out to be some multi year bear market, absolutely not. Does it have to go further lower, yes. But as always, that's when the opportunities are the most plentiful and fruitful!!

PS

If it were up to me, I'd love to see 10,000 on the DOW violated. That would set off a panic bottom worldwide!!! Good Luck.

Time For Cash

If you haven't done it yet, it's time to move to cash. The market isn't looking too healthy on the way up here, especially after the Tuesday romp we took two weeks ago (volume waning hard). If you need to be long, I would hold onto ONLY the stocks still moving higher. Any hard reversal in the market and I wouldn't stick around. If you play the short side, good time to look for them. If not, review your trading from August through February and slowly start preparing for the next leg up. At this point, we're at least 5 - 6 weeks away from even considering getting long, and preferably longer to shake this market out. I still think we can get to 3,000 on the NASDAQ before we really go down, but for now, I'm off that train.

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.

PS
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

Confused?!?!?

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.

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.

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

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.

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).

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.

Deja Vu?

I decided to compare the current Nasdaq versus the DOW from 1929 - 1938. Looking at the two charts, it seems there is a very similar pattern developing on the NASDAQ. Take a look at the two charts below, they are almost identical.

NASDAQ 2000 - Current

DOW JONES 1929 - 1938

Holy Cow

Wow, what a difference a few days can make in the market. Over the weekend I was excited. There were plenty of quality stocks setup and ready to go. I thought, given one more week, the underlying strength of the market would match that not seen since 2005. But the last two days has brought heavy selling on heavier volume, not good. I have to move to a neutral position and become cautious on this market. This could turn out to be nothing more then a massive shakeout, which would make sense, but until we know, no need to initiate any new positions. Sell any laggards or stocks that have made very little progress. But make sure to do the research. If this turns out to be a shakeout during an options expiration week, then next week could bring good tidings. The only consolation I can find, it took quite a bit of bad news to get the market to finally have a massive down day. The kind of bad news that usually accompanies capitulation. In the meantime, no reason to be fully exposed.

Are you ready for the fireworks

I'm going to make this short as I am short on time myself these days. But I haven't seen a market that's dying to explode like this since 2005/2003. Breakouts are holding up well, and quality stock after quality stock is setting up at the gates to run. Outside of a catastrophic event, there is nothing to hold this market back. Add the fact that almost everybody is waiting for the big correction, and you have the perfect recipe for a rally. Personally I'd like to see a correction, because it will only serve to reinforce the notion that the market always bounces, similar to the late 1990's (not to the same extent), and will only serve to supercharge the rally. If the correction doesn't happen now, which I do not foresee, I believe we will see something of a correction somewhere during the year followed by what will possibly be the last leg of this bull market. Go China, Vista, private equity, lower oil and gas prices, and of course interest rates (the fed stays put, no reason to lower, the economy is regaining it's legs). I'd like to see the market stay flat this week, it will only serve to strengthen the underlying strength of the market. Don't get caught sleeping behind the wheel. If this is the big rally I believe it is, you won't get the same chance again for some years. So get your research done and don't fear the market.

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.

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.

P.S.
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.

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