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.
Wednesday, June 14, 2006
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
- 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
CASH IS KING
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.
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.
Friday, December 23, 2005
READY TO RALLY!!!
This market is a volcano ready to explode. There is unbelievable underlying bullish pressure. The number of top notch, both fundamentally and technically solid, setups is not only numerous but the broadest I've seen in quite sometime. This is going to be the broadest rally we've seen in sometime. Every sector, yes, including airlines will participate. Oil is just high enough to keep the oil business humming, and just low enough not to effect the consumer or business. Economic growth is right around the Feds comfort zone, and high enough to keep earnings growing. Interest rates are still near historic lows and should hover in this area, without taking too much of a bite out the consumer and business. Other reasons for the bullishness:
1. Online sales will account for alot more of this seasons sales then expected providing a surprise to earnings.
2. CNBC has been discounting the value of DOW 11K. Not there is any, but psychologically there is.
3. CNBC has put the fear of January into the public. Every chance they get to remind us about how disastrous the first 3 days of January of 2005 were, they gladly do. Remember the January effect, CNBC doesn't even mention it. No importance in it, but last year it was the talk of the town. Also, the difference between last December and this December, last December the market wedged (rising market on decreasing volume) higher and this year we've drifted lower on decreasing volume. This is much healthier action for a bull market.
4. The public hates stocks. Here anyone outside the business talking about it? Of course not, between the choppy action and mostly sideways movement it was extremely difficult, some would say almost impossible, to make any money in the last two years. But they do love Japan.
5. THE WORLD's MAJOR ECONOMIES OUTSIDE THE US, NEW and OLD(i.e. JAPAN, INDIA, CHINA,etc...), are firing on all cylinders and recovering from long slumps. This will provide the additional boost to earnings estimates.
6. It's an election year. Congressmen aren't stupid enough not to encourage a rally through legislation? They do want to get re-elected?
7. Inflation? Forget about it, competition and potential for further productivity gains is too great.
8. 2006 will be a more peaceful year in the world, even in Iraq, hopefully.
About the only negative is Washington. The partisan bickering threatens the passage of key legislature to keep the country and economy safe from threat. The constant filibustering and lack of ideas is very worrisome. With an election year around the corner, I fear some congressman will prevent bills from passing or force other bills through with the intent of making the other party look bad. I know this is contrary to point six, but I did phrase it as a question.
Don't sit around and wait to see if the market can break and hold 11,000, by then you'll be late to the party. Take the trades as they come. If the market continues to act well and the breakouts hold their ground and advance, use that as the confirmation of the rally. This is the most bullish I've been since the April 29th bottom, but you have to listen to the market's signals. But of course, in case this is just one big setup, my risk management rules will save me from too much carnage. Do your research and trust the rules. Have a happy holiday and a happy new year.
1. Online sales will account for alot more of this seasons sales then expected providing a surprise to earnings.
2. CNBC has been discounting the value of DOW 11K. Not there is any, but psychologically there is.
3. CNBC has put the fear of January into the public. Every chance they get to remind us about how disastrous the first 3 days of January of 2005 were, they gladly do. Remember the January effect, CNBC doesn't even mention it. No importance in it, but last year it was the talk of the town. Also, the difference between last December and this December, last December the market wedged (rising market on decreasing volume) higher and this year we've drifted lower on decreasing volume. This is much healthier action for a bull market.
4. The public hates stocks. Here anyone outside the business talking about it? Of course not, between the choppy action and mostly sideways movement it was extremely difficult, some would say almost impossible, to make any money in the last two years. But they do love Japan.
5. THE WORLD's MAJOR ECONOMIES OUTSIDE THE US, NEW and OLD(i.e. JAPAN, INDIA, CHINA,etc...), are firing on all cylinders and recovering from long slumps. This will provide the additional boost to earnings estimates.
6. It's an election year. Congressmen aren't stupid enough not to encourage a rally through legislation? They do want to get re-elected?
7. Inflation? Forget about it, competition and potential for further productivity gains is too great.
8. 2006 will be a more peaceful year in the world, even in Iraq, hopefully.
About the only negative is Washington. The partisan bickering threatens the passage of key legislature to keep the country and economy safe from threat. The constant filibustering and lack of ideas is very worrisome. With an election year around the corner, I fear some congressman will prevent bills from passing or force other bills through with the intent of making the other party look bad. I know this is contrary to point six, but I did phrase it as a question.
Don't sit around and wait to see if the market can break and hold 11,000, by then you'll be late to the party. Take the trades as they come. If the market continues to act well and the breakouts hold their ground and advance, use that as the confirmation of the rally. This is the most bullish I've been since the April 29th bottom, but you have to listen to the market's signals. But of course, in case this is just one big setup, my risk management rules will save me from too much carnage. Do your research and trust the rules. Have a happy holiday and a happy new year.
Tuesday, July 12, 2005
Market Letter
It is important to analyze the market on a daily basis. In order tobe a successful trader, you have to be able to decipher real movesfrom head fakes, and adjust your trading accordingly.
I've been quite bullish on this market since 4/29, and got even morebullish last week when the terrorist attacks and $60/barrell oilfailed to hold the market down for long. But something fishy isgoing on. The rally seems more of a short covering rally the lastfew days, then real accumulation. Stocks that should be movingstrong with the market, just don't seem to be making any headway.
Now I always disclaim my statements with, "I could be wrong", that'swhy it's also important to backup that statement with a plan ofaction. So here is ours:
1. Continue to unload the laggards.
2. Keep a close eye on the strong performers for any sign ofweakness or sell signals.
3. Never let a good profit turn into a loss even if you can onlyretain $1.
4. Make sure the love of your life (your favorite stock or the oneyou truly believe is the one that will make you rich) can be partedwith on a moments notice. BOOM was a good example of that for ustoday. We had an awesome gain, added as he bounced off his movingaverage on volume, added some more as he broke to 52 weeks highs onvolume today, but out of no where the stock reversed hard on massivevolume today almost wiping all the gains we had. We didn'thesitate, sold the whole position to at least lock what was left ofthe profit. If we had held on, we would be underwater by severalthousand dollars. But we swore, he was the one. Today could'vebeen just one massive shakeout on him, but rules are rules, and ourrelationship with BOOM is over for now.
5. Tighten up the criteria for stocks that will be purchased if themarket continues to head higher.
6. Any sign of weakness on new buys quick profits or losses shouldbe taken. The 7 - 8% rule applies only to strong bull markets. Inflaky markets gains and losses need to be taken/cut quicker, andless trading needs to be done.
7. Start looking for potential short candidates in former leadingstocks that topped several months ago if we do go into a correction.
Now I'm not calling for a panic out the door. Just a reduction inexposure and tighter rules for increasing exposure. My belief atthis point is that the market has one more massive shakeout in store(another attack, a sudden climactic run of oil to $70+, you get mypoint) for us before any rally can materialize and have some stayingpower longer then a few months. This rally, if you've been playingit smart has yielded some nice returns, I just don't want to seethem evaporate and turn into losses. If the rally continues, great,we still have a large exposure to leading stocks, but I'd rather besafe then sorry.
I've been quite bullish on this market since 4/29, and got even morebullish last week when the terrorist attacks and $60/barrell oilfailed to hold the market down for long. But something fishy isgoing on. The rally seems more of a short covering rally the lastfew days, then real accumulation. Stocks that should be movingstrong with the market, just don't seem to be making any headway.
Now I always disclaim my statements with, "I could be wrong", that'swhy it's also important to backup that statement with a plan ofaction. So here is ours:
1. Continue to unload the laggards.
2. Keep a close eye on the strong performers for any sign ofweakness or sell signals.
3. Never let a good profit turn into a loss even if you can onlyretain $1.
4. Make sure the love of your life (your favorite stock or the oneyou truly believe is the one that will make you rich) can be partedwith on a moments notice. BOOM was a good example of that for ustoday. We had an awesome gain, added as he bounced off his movingaverage on volume, added some more as he broke to 52 weeks highs onvolume today, but out of no where the stock reversed hard on massivevolume today almost wiping all the gains we had. We didn'thesitate, sold the whole position to at least lock what was left ofthe profit. If we had held on, we would be underwater by severalthousand dollars. But we swore, he was the one. Today could'vebeen just one massive shakeout on him, but rules are rules, and ourrelationship with BOOM is over for now.
5. Tighten up the criteria for stocks that will be purchased if themarket continues to head higher.
6. Any sign of weakness on new buys quick profits or losses shouldbe taken. The 7 - 8% rule applies only to strong bull markets. Inflaky markets gains and losses need to be taken/cut quicker, andless trading needs to be done.
7. Start looking for potential short candidates in former leadingstocks that topped several months ago if we do go into a correction.
Now I'm not calling for a panic out the door. Just a reduction inexposure and tighter rules for increasing exposure. My belief atthis point is that the market has one more massive shakeout in store(another attack, a sudden climactic run of oil to $70+, you get mypoint) for us before any rally can materialize and have some stayingpower longer then a few months. This rally, if you've been playingit smart has yielded some nice returns, I just don't want to seethem evaporate and turn into losses. If the rally continues, great,we still have a large exposure to leading stocks, but I'd rather besafe then sorry.
Thursday, July 07, 2005
Market Letter
Could fear run anymore rampant this morning? We got the perfectshakeout today to force the weak shareholders to sell. Deamnd isabout to outstrip supply in the market, causing prices to rise. Nowthe employment report could change all that but how much worse canthenews get? Oil over $60, rates still rising, London Terrorist Attack,and anything else you read about. The market signaled today that thejobs report tomorrow will come in to their liking no matter what thatis. The market likes to climb a wall of worry. Uncertainty it hates.
If I'm correct in my assumptions, I suggest you're ready with yourbuylist if the job data is to the markets liking.
If I'm correct in my assumptions, I suggest you're ready with yourbuylist if the job data is to the markets liking.
Friday, June 24, 2005
Market Letter
Market has been moving sideways to higher in the last few weeks andsold off hard today on higher volume as oil crossed $60/barrel. Italmost seems like December where the market churned higher, and thenjust got crushed in January.
Hold onto the stronger stocks as one distribution day won't kill themarket, but definitely getting rid of the laggards. This is a goodtime to start looking for new setups. It seems we will need onemore down to sideways week to allow for proper bases to setup in thestronger stocks. Some are already setup just waiting for a signalfrom the market.
Oil reached $60 a barrel, but it almost seems that a double top hasnow formed. If these levels are sustained the market will needsometime to digest which would mean that a summer correction in themarkets is 90% likely, unless oil retreats away from $60/barrel.What will the market be looking for? How will oil in the $60'seffect the economy. $50's didn't hurt. But will the $60's?
Even if we do start a correction here, we'll probably see anotherweek or two rally somewhere during earnings season. If this is thecase and the rally is weak, then even the strongest of stocks needto be examined even closer, and possibly sold. For now, just getrid of the laggards.
Only time will tell, for now better get safe then sorry.
Hold onto the stronger stocks as one distribution day won't kill themarket, but definitely getting rid of the laggards. This is a goodtime to start looking for new setups. It seems we will need onemore down to sideways week to allow for proper bases to setup in thestronger stocks. Some are already setup just waiting for a signalfrom the market.
Oil reached $60 a barrel, but it almost seems that a double top hasnow formed. If these levels are sustained the market will needsometime to digest which would mean that a summer correction in themarkets is 90% likely, unless oil retreats away from $60/barrel.What will the market be looking for? How will oil in the $60'seffect the economy. $50's didn't hurt. But will the $60's?
Even if we do start a correction here, we'll probably see anotherweek or two rally somewhere during earnings season. If this is thecase and the rally is weak, then even the strongest of stocks needto be examined even closer, and possibly sold. For now, just getrid of the laggards.
Only time will tell, for now better get safe then sorry.
Wednesday, May 18, 2005
Market Letter
Officially all the major market indexes are now in confirmed rallies.Today we finally got another powerful day in the market confirmed byvolume. I know I was cautious the other day, but the first rule inthe market is to always protect your capital. At this point I'm evenmore convinced that my original call was correct that we have seen abottom and the market will continue to move higher. If you haven'tparticipated in this rally to this point, I would recommend you begin.By the time things become obvious that is usually the end of the move.
I found something very interesting while doing my research the lasttwo days. Retail and hotel/motel REITs, retailers, and other consumercompanies are either at or near 52 weeks highs. If the economy isdoing so poorly why are these stocks moving higher. Is it possiblethat the market is signaling better times ahead as it usually does?I'd say yes. As long as there is a Republican President the mediawill continue to try and convince you that the economy is heading intorecession. But the market knows better.
Don't let your opinions keep you on the sidelines. If this marketweakens for some reason, I'll let you know. For now, do your researchand get involved. But don't take my word for it, just look at theprice volume action of the market, especially the NASDAQ, which isleading index at this point.
Remember, always protect your capital first.
I found something very interesting while doing my research the lasttwo days. Retail and hotel/motel REITs, retailers, and other consumercompanies are either at or near 52 weeks highs. If the economy isdoing so poorly why are these stocks moving higher. Is it possiblethat the market is signaling better times ahead as it usually does?I'd say yes. As long as there is a Republican President the mediawill continue to try and convince you that the economy is heading intorecession. But the market knows better.
Don't let your opinions keep you on the sidelines. If this marketweakens for some reason, I'll let you know. For now, do your researchand get involved. But don't take my word for it, just look at theprice volume action of the market, especially the NASDAQ, which isleading index at this point.
Remember, always protect your capital first.
Tuesday, May 17, 2005
Market Letter
On the surface, today looked like a strong day, but digging deeperthe market continued its pattern of sell offs on high volume andrallies on low volume. Today was no different. The major averageshad huge gains but volume was no where to be found. At this point Iwould be reducing your exposure to the long side especially ifyou're on margin. It looks like the market may need another downleg before moving higher, particularly the DOW and S&P. If youremember I got extremely bullish when the NASDAQ undercut 1900 andrallied strongly, but I was cautious about the fact that I would'veliked to see the DOW undercut 10,000. It now looks like it mayhappen. If not, then I will resume increasing my exposure on thelong side. For now though, no need to take any chances with thecurrent price volume action of the major indexes. Tomorrow is thePPI report; let's see how the market acts.
I've heard a lot about buying homebuilders for the long term orinvesting in real estate in hot markets. If you're one those peopleI would strongly reconsider. The homebuilders are looking extremelyweak on their charts and look like they are topping. Talk to anyreal estate professional who's willing to give you a true assessmentof the market, and they will tell you that things aren't looking asgreat as things seem. Prices are getting away from most people'scomfort and affordability range. Most of the buying is being doneby investors and by homeowners who already own 2+ properties. Takeinto account that on every market news channel you have oneanalyst/real estate professional after another telling you this timeit's different and we are in a paradigm shift, and shivers shouldstart to creep down your neck. Think back to the stock market in1999 and 2000, they were saying the same thing about stocks. Therest eventually was history as we all know.
Learn from history, it repeats itself, more then you think.
I've heard a lot about buying homebuilders for the long term orinvesting in real estate in hot markets. If you're one those peopleI would strongly reconsider. The homebuilders are looking extremelyweak on their charts and look like they are topping. Talk to anyreal estate professional who's willing to give you a true assessmentof the market, and they will tell you that things aren't looking asgreat as things seem. Prices are getting away from most people'scomfort and affordability range. Most of the buying is being doneby investors and by homeowners who already own 2+ properties. Takeinto account that on every market news channel you have oneanalyst/real estate professional after another telling you this timeit's different and we are in a paradigm shift, and shivers shouldstart to creep down your neck. Think back to the stock market in1999 and 2000, they were saying the same thing about stocks. Therest eventually was history as we all know.
Learn from history, it repeats itself, more then you think.
Wednesday, May 04, 2005
Market Outlook
The market gave us a powerful confirmation day on all the indexes. Ifyou're not long yet or haven't looked for setups I suggest you start.If anything changes I will let you know.
Sunday, May 01, 2005
Market Letter
My belief is that the market marked a bottom on Friday. Barring anyunforeseen events, we should move higher from here. Here are someof the reasons:
1. Sentiment has been highly bearish over the last several weeks.
2. The NASDAQ under cut 1900 and traders began to panic.
3. Oil is under $50 a barrel and prob has topped, again barring anyunforeseen turmoil in the Middle East.
4. Top rated stocks with high growth have begun to breakout out ofbases and hold their breakout points. Other stocks are close tofinishing up their bases.
5.The reversal on Friday came on heavy volume.
6. Earnings are coming in well above expectations and guidance hasbeen good.
7. Softer economic data recently may be signaling that the Fed hasdone their job and interest rates maybe close to topping in the nextmonth or two.
The market may be seeing better times on the horizon. Remember,recent bad news is already built in and the market moves on futureexpectations ( 6 - 8 months outward). Typically, things look theworst at the bottom and the best at the top.
We may still go lower but not by much. I would have preferred theDOW to undercut 10K on Friday to really set off even more panic.
To get a firm confirmation that this rally will hold, we will need astrong up day sometime after Tuesday of next week on heavier volumethen the previous day and no more high volume sell off days.
This leg up won't be the best one, but it is a start. Once morestocks setup and breakout, the market will then have the ammo toreally make a move.
Nothing is 100%. Cut your losses short, and if the market starts toget distributed next week, get off margin as we may actually need tosee the DOW under 10K before we could go higher.
1. Sentiment has been highly bearish over the last several weeks.
2. The NASDAQ under cut 1900 and traders began to panic.
3. Oil is under $50 a barrel and prob has topped, again barring anyunforeseen turmoil in the Middle East.
4. Top rated stocks with high growth have begun to breakout out ofbases and hold their breakout points. Other stocks are close tofinishing up their bases.
5.The reversal on Friday came on heavy volume.
6. Earnings are coming in well above expectations and guidance hasbeen good.
7. Softer economic data recently may be signaling that the Fed hasdone their job and interest rates maybe close to topping in the nextmonth or two.
The market may be seeing better times on the horizon. Remember,recent bad news is already built in and the market moves on futureexpectations ( 6 - 8 months outward). Typically, things look theworst at the bottom and the best at the top.
We may still go lower but not by much. I would have preferred theDOW to undercut 10K on Friday to really set off even more panic.
To get a firm confirmation that this rally will hold, we will need astrong up day sometime after Tuesday of next week on heavier volumethen the previous day and no more high volume sell off days.
This leg up won't be the best one, but it is a start. Once morestocks setup and breakout, the market will then have the ammo toreally make a move.
Nothing is 100%. Cut your losses short, and if the market starts toget distributed next week, get off margin as we may actually need tosee the DOW under 10K before we could go higher.
Wednesday, March 16, 2005
Market Letter
It's been a while since I wrote this letter but things have been alittle busy.
Anyone who has been around me since beginning ofJanuary knows that I turned bearish and have been since then. Therally that went on in February was led by energy and basic materialstocks. These sectors do not lead market rallies for too long, theyjust don't have the long term growth rates necessary. If you paidattention to the price volume action of theindexes you would've noticed that the down days kept coming in inhigher volume then the up days. The NASDAQ which was the lastindex to show a follow through, followed through too late, andcouldn't mke any headway passed it's 50DMA. Leading stocks, whatleading stocks. That's right, right now there are none. Energy andbasic material stocks cannot lead a rally for too long, they justdon't have the long term growth rates necessary.
If you're not out of your long positions by now, make sure you keep areal close eye on them. If they are down significantly don't beafraid to take profit or the loss. Once the market gets some legsagain, there will be plenty of opportunities.
Anyone who has been around me since beginning ofJanuary knows that I turned bearish and have been since then. Therally that went on in February was led by energy and basic materialstocks. These sectors do not lead market rallies for too long, theyjust don't have the long term growth rates necessary. If you paidattention to the price volume action of theindexes you would've noticed that the down days kept coming in inhigher volume then the up days. The NASDAQ which was the lastindex to show a follow through, followed through too late, andcouldn't mke any headway passed it's 50DMA. Leading stocks, whatleading stocks. That's right, right now there are none. Energy andbasic material stocks cannot lead a rally for too long, they justdon't have the long term growth rates necessary.
If you're not out of your long positions by now, make sure you keep areal close eye on them. If they are down significantly don't beafraid to take profit or the loss. Once the market gets some legsagain, there will be plenty of opportunities.
Monday, December 20, 2004
Market Letter
Jesse Livermore used to say that the market's job is to confuse asmany people as possible. That is exactly what the market has beendoing for the last few weeks. As expected, the market paused rightaround its highs from January of this year. Right now the battlebetween the bulls and the bears is keeping the market from makingany progress in either direction. We've had 3 nasty sell offs inthe last two weeks, which has raised a caution flag for me as far ashow much strength the market has right now to move higher. But acloser look at the leading stocks, and you'll quickly see, that theyhaven't budged. Most are calmly biding their time while the marketworks through its current congestion. The S&P which has beenleading since August has also continued to make new multi year highseven as the NASDAQ and DOW move sideways. Right now is a good timeto look through your stocks and weed out the laggards from yourportfolio to rebuild your ammo stockpile (cash or margin) so you'reready to buy new breakouts in your better performing stocks or newemerging leaders. It will also protect you if the market has runout of steam. As always, if we get a couple more of these nastysell offs in the next week or so, the current bull could be introuble and don't be afraid to go to cash until the market can getits footing.
The rest of this week and month should see a decrease in tradingactivity as Wall Street prepares for Christmas and New Years.There's not much as far as earnings until the second week ofJanuary, when earnings season will begin.
A reader asked about NAVR, and immediately tried to justify why itshould be bought right now because of fundamentals. Pastfundamental performance is meaningless if the stock is headinglower. The market only cares what the fundamentals will look like6 - 8 months from now. Estimates might look good, but the smartmoney knows better then to look at estimates available to thegeneral public. They have their own team of analyst doing theresearch, and that's the research you'll never see. All I see is astock with good fundamentals but poor technicals. The stock triedto breakout of a late stage consolidation (base), and quicklyfailed. The failure could be due to the market having difficultygoing higher. But, the stock sliced though it's 50 DMA on heavyvolume, and hasn't been able to recover back above it. At thispoint, I would at least take some profits off the table, and keep atight watch over the next few days and weeks on the stocks technicalaction. If you're not in it, then wait for it to setup again, rightnow the risk/reward isn't in your favor considering the technicalaction of the stock and market.
You might be thinking that the estimates and data available is useless. By themselves I would say yes. Combined with technicals,it allows you to get a clearer picture of what the smart moneyknows. Are the technicals always right? No. But our job is tominimize our risk, and maximize our gain. We will miss some of thebig runs, but we will also avoid some of the big sell offs, savingus allot of money in the end. Remember, 100% gain, can be wiped outby 50% loss. So it's easier to lose your money, than make it.
If you want a good example of how using only fundamentals would'vefailed big time, just look back to 2000 when the bubble burst.Every stock that was absolutely getting creamed, fundamentallylooked like they were going to be the next CSCO or MSFT. But, justlike clockwork, 6 - 8 months later most of those companies startedto report problems with their fundamental picture going forward.
The rest of this week and month should see a decrease in tradingactivity as Wall Street prepares for Christmas and New Years.There's not much as far as earnings until the second week ofJanuary, when earnings season will begin.
A reader asked about NAVR, and immediately tried to justify why itshould be bought right now because of fundamentals. Pastfundamental performance is meaningless if the stock is headinglower. The market only cares what the fundamentals will look like6 - 8 months from now. Estimates might look good, but the smartmoney knows better then to look at estimates available to thegeneral public. They have their own team of analyst doing theresearch, and that's the research you'll never see. All I see is astock with good fundamentals but poor technicals. The stock triedto breakout of a late stage consolidation (base), and quicklyfailed. The failure could be due to the market having difficultygoing higher. But, the stock sliced though it's 50 DMA on heavyvolume, and hasn't been able to recover back above it. At thispoint, I would at least take some profits off the table, and keep atight watch over the next few days and weeks on the stocks technicalaction. If you're not in it, then wait for it to setup again, rightnow the risk/reward isn't in your favor considering the technicalaction of the stock and market.
You might be thinking that the estimates and data available is useless. By themselves I would say yes. Combined with technicals,it allows you to get a clearer picture of what the smart moneyknows. Are the technicals always right? No. But our job is tominimize our risk, and maximize our gain. We will miss some of thebig runs, but we will also avoid some of the big sell offs, savingus allot of money in the end. Remember, 100% gain, can be wiped outby 50% loss. So it's easier to lose your money, than make it.
If you want a good example of how using only fundamentals would'vefailed big time, just look back to 2000 when the bubble burst.Every stock that was absolutely getting creamed, fundamentallylooked like they were going to be the next CSCO or MSFT. But, justlike clockwork, 6 - 8 months later most of those companies startedto report problems with their fundamental picture going forward.
Saturday, December 04, 2004
Market Letter
So much for the pause, the market blasted ahead this week onpowerful volume. Economic news was mostly good, except for thepayroll job numbers. The economy added jobs just not at the pacethe economists expected. Without the job news, the market could'vebeen up allot more, after Intel guided their earnings higher. Theguidance shouldn't have been a surprise, since the semi-sector wasalready strong, indicating better news ahead for the entire sector.Earlier in the week, a rapid drop in oil prices got the market in abuying mood. The market may pause again this week, as it approachesthe January highs.
A reader asked me about SIRI and AMX. SIRI is an interesting stock,but a highly speculative one. If you owned it before the suddenmove up, great, but to buy it now would be exposing yourself to toomuch risk. AMX is a great stock. It has it all, fundamentals andtechnicals, but the best time to have bought the stock was back inOctober. The stock will move with the market. It's ok to buy thestock here since it has paused, but I would be out quick if themarket starts to sell off hard or the stock gives you sell signals.Otherwise, it should be a good one as long the market is still inbull mode, may have power to $70 or above.
A reader asked me about SIRI and AMX. SIRI is an interesting stock,but a highly speculative one. If you owned it before the suddenmove up, great, but to buy it now would be exposing yourself to toomuch risk. AMX is a great stock. It has it all, fundamentals andtechnicals, but the best time to have bought the stock was back inOctober. The stock will move with the market. It's ok to buy thestock here since it has paused, but I would be out quick if themarket starts to sell off hard or the stock gives you sell signals.Otherwise, it should be a good one as long the market is still inbull mode, may have power to $70 or above.
Monday, November 29, 2004
Market Letter
The market has paused since the 17th. Can we say dollar? Yes, thedollars depreciation has almost taken over for oil as a potentialmarket drag. But all bull markets like to climb a wall of worry, sothis is the new worry of the day. Don't worry; oil is still in theback of most people's mind.
All bull markets pause to consolidate and shake off the froth. Thisweek brings alot of big economic reports. GDP, oil inventories, andpayroll numbers. Any of these numbers can jolt the market one wayor another. If you've noticed the action in the market, you've seenthe market gap up and come in almost regularly on these reports,similar action to the bull run of last year. This type of actiontends to suppress the speculation in the market, and allow it tomove in a steady fashion. But, speculation can't be held backforever, and once it is unleashed, that final run is usually a signof a top to come. My point is, in a gap up opening, be careful ininitiating long positions that day, as they might quickly reverse onyou. Best times to buy, is a flat opening, or a down opening and areversal into positive territory.
Keep looking for breakouts as leading stocks continue to consolidatewell, as the market takes a breather. If my assumptions arecorrect, the market should continue to move higher through the firstquarter of next year. But keep an eye on it, conditions can changein as little as one week.
All bull markets pause to consolidate and shake off the froth. Thisweek brings alot of big economic reports. GDP, oil inventories, andpayroll numbers. Any of these numbers can jolt the market one wayor another. If you've noticed the action in the market, you've seenthe market gap up and come in almost regularly on these reports,similar action to the bull run of last year. This type of actiontends to suppress the speculation in the market, and allow it tomove in a steady fashion. But, speculation can't be held backforever, and once it is unleashed, that final run is usually a signof a top to come. My point is, in a gap up opening, be careful ininitiating long positions that day, as they might quickly reverse onyou. Best times to buy, is a flat opening, or a down opening and areversal into positive territory.
Keep looking for breakouts as leading stocks continue to consolidatewell, as the market takes a breather. If my assumptions arecorrect, the market should continue to move higher through the firstquarter of next year. But keep an eye on it, conditions can changein as little as one week.
Wednesday, November 24, 2004
Market Update
Market continues to act well. We are in for abreather at some point, and Friday may have started it. But by the way the market reversed today it looks like it just wants to continue higher. I'm not one to argue with the market as long you have strict risk and profit management rules in place. Several mergers and big dividends are about to close and get distributed. This will add alot of liquidity to drive the markethigher. On top of the economy reaccelarating, andchristmas just around the corner, it looks like itwill be a merry christmas and a happy new year for themarkets. Leading stocks, continue to lead. Even asthe market has had some bouts with distribution days,they have held up nicely, and have corrected modestly.Earlier this year, the exact opposite occured,leading stocks came crashing back into bases as themarket got sold off. Hold onto your winners as longas they are not showing sign of weakness, and look fornew buys that maybe setting up for the next leg up.Oil could still pose a short term problem, but as soonas it stabilizes the market just discounts it andmoves higher. The rally that started in late Augustis still intact. We got rally confirmation days onall the indexes, even though the DOW needed to do ittwice since it undercut it's August rally low, on theSpitzer affect. Volume has been running much heavier on up daysthan down days. Look back at MArch 2003 and you will see alot ofsimilarities between the two markets. Earlier this year, everyrally was followed by heavy selling in the indexes. The advancedecline has also been trending higher since August. The 20 and 50DMA have crossed overon both the NASDAQ and S&P, and we're just waiting onthe DOW. The S&P has been the leader so far thisyear, but that may change as the NASDAQ ramps up. Nomatter which index leads, just look for the leadingstocks. If you haven't particiapted up to now, there are stillopportunities out there, you just need to look for them.
Wednesday, November 01, 2000
October Market Update
The market took us on another roller coaster ride during the month of October. The market started down in the beginning of the month on the typical concern that we will have another crash, such as the one's in 1929, 1987, & 1998. Adding to the downdraft was Intel's earnings report. Intel reported earnings that were two cents lower than expectations, caused by lower average selling prices of its chips. Dell warned that its quarter would miss as a result of higher DRAM prices, due to the Taiwan earthquake, making Wall Street wonder about the true extent of the earthquake. IBM stated that its 4th quarter wouldn't meet expectations due to Y2K spending slowdown, which brought the Y2K issue back to the forefront of concern. The Producer Price Index (the "PPI") came in at 1.1%, sending the market spiraling down, rejuvenating concern that inflation is bearing its ugly head, and sending the 30-year bond close to the 6.4% level.
The market did an about face around the middle of the month when the Consumer Price index (the "CPI") failed to confirm the inflation picture that the PPI portrayed. It became evident that the PPI's spike was caused mainly by the increase in oil and cigarette prices. Intel, after dropping the earnings bomb on the market early on, had an upbeat meeting with analysts, introducing the new family of chips, stating that their 4th quarter will be strong, and that they don't see any Y2K slowdowns in their business. To top it off, the final economic indicators, the GDP, came in at a strong 4.8%, and the two inflationary indicators, GDP chain deflator and employment cost index, came in below expectations, confirming that the economy continues to experience good growth with low inflation. The good economic news sent the long bond yield down to 6.2%, adding the third component that the stock market likes, lower interest rates.
The month ahead will be a challenging one. Y2K is still a major issue on the minds of investors, and any hint that it may cause disruptions could cause another market downturn. The Employment Payroll Report, which shows job growth and increases in hourly wages, will be an important one on the 5th of November. The PPI on the 10th and the CPI on the 17th will be closely watched, especially after the 1.1% spike by the PPI in October. The Federal Reserve Committee meeting on the 16th is the all-important date. We will find out the Fed's plans for interest rates going forward. The consensus seems to be that the Fed will raise rates by 25 basis points. And of course some more earnings, but they'll be secondary drivers.
The market did an about face around the middle of the month when the Consumer Price index (the "CPI") failed to confirm the inflation picture that the PPI portrayed. It became evident that the PPI's spike was caused mainly by the increase in oil and cigarette prices. Intel, after dropping the earnings bomb on the market early on, had an upbeat meeting with analysts, introducing the new family of chips, stating that their 4th quarter will be strong, and that they don't see any Y2K slowdowns in their business. To top it off, the final economic indicators, the GDP, came in at a strong 4.8%, and the two inflationary indicators, GDP chain deflator and employment cost index, came in below expectations, confirming that the economy continues to experience good growth with low inflation. The good economic news sent the long bond yield down to 6.2%, adding the third component that the stock market likes, lower interest rates.
The month ahead will be a challenging one. Y2K is still a major issue on the minds of investors, and any hint that it may cause disruptions could cause another market downturn. The Employment Payroll Report, which shows job growth and increases in hourly wages, will be an important one on the 5th of November. The PPI on the 10th and the CPI on the 17th will be closely watched, especially after the 1.1% spike by the PPI in October. The Federal Reserve Committee meeting on the 16th is the all-important date. We will find out the Fed's plans for interest rates going forward. The consensus seems to be that the Fed will raise rates by 25 basis points. And of course some more earnings, but they'll be secondary drivers.
Monday, August 07, 2000
Markets - What a Wedgie
If you're getting excited about the action of the last few days, I have some potentially bad news. This is the same exact action we saw in the markets in the middle of the March/April Sell off.
All three major indexes, DOW, NASDAQ, & S&P have been wedging higher. That is, rising while volume has been drying up. What does this mean to you? Even though the markets have been rising, the conviction of institutions to fully commit has been lacking. Without them, the current rally doesn't stand a chance.
All three major indexes, DOW, NASDAQ, & S&P have been wedging higher. That is, rising while volume has been drying up. What does this mean to you? Even though the markets have been rising, the conviction of institutions to fully commit has been lacking. Without them, the current rally doesn't stand a chance.
Also interesting, the short ratio topped out almost at the same time the market started to rally in early June. Enforcing the idea that the current rally was nothing more then a short squeeze. The bull/bear and put/call ratios also never saw the extremes that these ratio exhibits when firm bottoms are made, and the DOW and NASDAQ are below their 200 day moving averages.
Right now is a good time to be cautious. There are a lot of contrarian indicators pointing to further declines in the markets, but look for upcoming economic numbers to potentially add fuel to this rally. The market should rally strong if the economic numbers are good. If they don't, then put the red flag up, and start waving it.
The market has now entered it's worst three months of the year. If the past is any indication, then don't look for this current rally to materialize into anything more then a bear trap.
I have one prediction. If this rally is a bear trap and the market does sell off, look for a bottom to be put in late August or early September. Why? Everyone is on to the fact that the market has bottomed in October for the past few years. I believe that these people will sell off their holdings earlier in anticipation of the bottom, and position themselves back in stocks earlier to try and take full advantage of the bottom.
Good Luck!!
If you have to remember anything, remember the following:
Cut you losses short. Let your winners run, not your losers.
Sunday, August 06, 2000
Kulicke & Soffa - KLIC
Here is a great example of why all the research in the world wouldn't have clued you in to the earnings warning to come from KLIC on 8/3. But looking at the chart, you would've realized that something fishy was going on.
Looking at the weekly chart below, the stock broke out of a year long cup and handle pattern, and went on to move 124% over the next three months before topping out with the rest of the market in March.
The stock was also part of the strong semiconductor equipment group, which almost every analyst on the street was touting the strong fundamentals, and how the cycle of growth would continue into at least next year. But what do they know?
If you were lucky enough to ride the stock out of the cup and handle, good, but if you didn't get out, you're sitting on a nice loss, bad!!
So how would you have know to get out? Volume wasn't much of a factor in this chart. If you look at the move up or even down early on there wasn't much distribution. The two big days of distribution days on 3/16 and 4/4 were more like accumulation days, as the stock recovered from major sell offs those day to close in the upper range of the day.
Confused yet? Well, good, then your learning that you need to add other sell indicators to your arsenal. In this case the drop below the 50 day moving average on 3/14 should've gotten you out of the stock. If you were stubborn and didn't get out you probably swallowed your heart over the next few days as the stock fell all the way down to 20, the breakout level of the cup and handle pattern, before reversing higher. At that point you were thanking god that the stock began to move higher. The stock proceeded to power through it's 50 day moving average on higher volume. So you thought you were out of the woods, and were able to pick up those cocktail party discussions. Ha!!! Boy were you wrong. The stock continued higher for a few more days but on absolutely no conviction, and then crashed through the 50 day moving average on heavy volume. If you didn't get out here then you were asking for trouble, as the stock tested the $20 level again. At this point a descending triangle began to form. If you at least recognized this bearish pattern forming, you still could've gotten as the stock tested the upper range of the triangle and the 50 day moving average several more times, and failed to break throughor hold above. OK, if you're still in the stock, then the break through the 200 day moving average on 7/21 should've been a final warning that you should take your profit and run.
At this point emotion begins to take over. Traders start to question their selling ability. The most common thought, it's down so far, it can't possibly go lower considering it's in a strong sector. Well, if you were paying attention to the SOX index, you would've realized that the sector the stock was in was on the verge of breaking down itself (Read the 7/31 Stock of The Week, where MB. featured this potential breakdown).
So what's the conclusion? Somebody obviously knew something we didn't know. This was a well orchestrated distribution, as volume didn't clue us in. But the constant breakdown below the 50 day moving average, was a good sign that the institutions were up to no good. This level and the 200 day, are usually where the institutions like to do their buying and selling. So the warning on August 3rd shouldn't have been to much of a surprise. You had plenty of opportunities to get out, hopefully you took them. If not, learn from this experience and don't make the same mistake again.
Good Luck!!
Looking at the weekly chart below, the stock broke out of a year long cup and handle pattern, and went on to move 124% over the next three months before topping out with the rest of the market in March.
The stock was also part of the strong semiconductor equipment group, which almost every analyst on the street was touting the strong fundamentals, and how the cycle of growth would continue into at least next year. But what do they know?If you were lucky enough to ride the stock out of the cup and handle, good, but if you didn't get out, you're sitting on a nice loss, bad!!
So how would you have know to get out? Volume wasn't much of a factor in this chart. If you look at the move up or even down early on there wasn't much distribution. The two big days of distribution days on 3/16 and 4/4 were more like accumulation days, as the stock recovered from major sell offs those day to close in the upper range of the day.
Confused yet? Well, good, then your learning that you need to add other sell indicators to your arsenal. In this case the drop below the 50 day moving average on 3/14 should've gotten you out of the stock. If you were stubborn and didn't get out you probably swallowed your heart over the next few days as the stock fell all the way down to 20, the breakout level of the cup and handle pattern, before reversing higher. At that point you were thanking god that the stock began to move higher. The stock proceeded to power through it's 50 day moving average on higher volume. So you thought you were out of the woods, and were able to pick up those cocktail party discussions. Ha!!! Boy were you wrong. The stock continued higher for a few more days but on absolutely no conviction, and then crashed through the 50 day moving average on heavy volume. If you didn't get out here then you were asking for trouble, as the stock tested the $20 level again. At this point a descending triangle began to form. If you at least recognized this bearish pattern forming, you still could've gotten as the stock tested the upper range of the triangle and the 50 day moving average several more times, and failed to break throughor hold above. OK, if you're still in the stock, then the break through the 200 day moving average on 7/21 should've been a final warning that you should take your profit and run.
At this point emotion begins to take over. Traders start to question their selling ability. The most common thought, it's down so far, it can't possibly go lower considering it's in a strong sector. Well, if you were paying attention to the SOX index, you would've realized that the sector the stock was in was on the verge of breaking down itself (Read the 7/31 Stock of The Week, where MB. featured this potential breakdown).
So what's the conclusion? Somebody obviously knew something we didn't know. This was a well orchestrated distribution, as volume didn't clue us in. But the constant breakdown below the 50 day moving average, was a good sign that the institutions were up to no good. This level and the 200 day, are usually where the institutions like to do their buying and selling. So the warning on August 3rd shouldn't have been to much of a surprise. You had plenty of opportunities to get out, hopefully you took them. If not, learn from this experience and don't make the same mistake again.
Good Luck!!
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