As mentioned previously, the market was severely overbought. A pullback was due...had been due for a few days.
Many stocks are forming the right sides of their bases. Some might be forming handles. The market is not going to allow the majority of stocks to break out though until earnings are on the table. So we should not expect breakouts to be working yet except in cases where companies have already reported. Those that have preannounced positive news or have had good earnings are being rewarded, at least short term: AMED, MON, FDO, NTCT, SGR. SHLD is being rewarded for good same store comps today. Many of these charts are awful. Some of the fundamentals are terrible. The point is, it is no longer a one way street down.
This rally isn't over and yesterday's volume was pretty low. We'll just have to keep our eyes open the next few weeks to see what transpires.
I'm watching about 50 stocks right now. Probably the same ones you are watching: EBS, MYGN, V, AVAV, AMZN, THOR, LPHI, etc...If you have a small account you might have an advantage right now, because some of these stocks are very thin. For those with large accounts, it is hard to justify the purchase of some of these low-priced thinly traded names...too easy to get stuck....spreads too wide.
It only takes two or three stocks to have a good year. I learned that from Dan Zanger. He was up 180% in 2005 on three stocks primarily: GOOG, SNDK, AAPL. But the same lesson can be learned from O'Neil, Darvas, etc. I also recall reading somewhere that Steve Cohen made 90% of his money on 5% of his trades...same principle.
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- I am a money manager working out of a small cabin on my property. My trading style melds together the market philosophy of Jesse Livermore, Nicholas Darvas, William O'Neil, and many others. I have taken what I learned from them and added to it from my own market observations over the last many years. Before becoming a professional trader, I completed my M.B.A. and spent about eight years doing consulting work with Ernst & Young, Cap Gemini and Deloitte Consulting. Before that, I spent a few years in the seminary studying to be a Priest. My weekdays are spent with my wife and children, and in my cabin, where I study the stock market assiduously. Trading is my passion.
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10 comments:
ST, where/how do you find your candidates and ideas? Do you do screening on Daily Graphs, take them from IBD, etc? I use DG to screen based on the HTMMIS parameters and was curious if you do the same. Thanks.
ST,
If the market is up again with feeble volume and "leaders" behave just like what they are now, are you going to buy some short ETF?
I bought some short ETF in late August but sold it in early september last yaer when I though three wave down already happened (I did not know there would be a fourth leg and the fourth leg down was this severe). But market broke wide open after I sold.
I do not know anything about shorting, so the only option for me is to buy some short ETF.
Ge
Big J,
I use Daily Graphs. I look through all the charts.
GE,
I am not a prognosticator. I do not know what the market is going to do. Nevertheless, from my perspective we are working off an extremely overbought market. I am long right now. To me , it doesn't "feel" like this maket wants to go down. If it really wanted to go down it wouldn't be fighting so hard against it. Can you feel that? Of course, if it does go down I lose my profits or take some meager gains and I get out...simple.
ST,
I am not sure what will happen, either. I notice the market is quite "resistant" to the bad news. It is my guess only, the market is trying to price in Obama's huge ecnomic stimulus down the road.
What bothers me is the leadership performance after such a long time of the follow through. It seems even worse than last august when at least some quality leaderships, such as IBM and CELG, were setting up after market had three wave down. Now we only have APOL and many thin "leaders" are not going anywhere.
Let's see what will happen
Ge
The market doesn't feel right. I'm out of everything now. Stocks aren't acting properly.
Hello ST, first post here. Could you comments on how to manage for a retirement account which has only 3 choices:
a) US Equity (SP500),
b) Fixed Income, Bonds ,
c) 1/3 US equity, 1/3 International, 1/3 Fixed Income, Bonds
I can only jump in/out at end of day. Currently all in fixed income. I tried to manage it the iBD way. Thanks.
ST,
One thing I forget to mention. If based on human psychology (Justin mammis), the first wave of selling is abandon of hope, the second wave of selling is based on bad earning, and the third wave of selling is because of distressed selling of fundamentally sound stocks, then we are just beginning of the second wave of selling. We will see what the market will tell us.
Ge
Gli3, how did O'Neil and his PMs do last year? Were they up?
Wendy was up a lot. Charles was up 100% with major killing of AAPL (he bought in the exact bottom) but busted by two thin chinese stocks. Mike mostly in cash and I do not know about Scott. I do not know the rest of the PMs, but gut feeling tells me Lee and Steven should be up.
They did not short.
Bill is a legend, but he gets carried away and excited about many stocks which turn out to be nothing but a beautiful story.
Ge
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