The last few days we've seen quite a rally; an 11% gain from the DJIA's intraday low on March 6th.
If you started counting the rally attempt on Friday or if you started counting on Tuesday - the market has followed through.
I'm not going to argue with those facts. Technically we are in a "confirmed rally". Nevertheless, I haven't forgotten that we have had more than a few of these "confirmed rallies" over the last 15 months. They have all become "confirmed failures". So, forgive me if I'm not too excited about this latest one.
The problem is this: Except for a few stocks that I can count on one hand, where are the leaders breaking out of bases on heavy volume - the ones that are supposed to lead this rally higher? The laggard, beaten down stocks are the ones primarily getting the bids.
It would be really nice if the market were beginning a true uptrend. However, the lack of leadership...the lack of quality stocks accompanying this rally is problematic for longer term speculators.
I'm sure you short-term guys are having a blast. My best to you!
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25 comments:
ST,
I passed the CANSLIM certification exam.
I am not sure if it is a big deal to others, but to me, it is. In my meetup group, I know 4 people passed the exam. Two of them are hedge fund managers. The other two are independent traders.
I worked very hard for it. I am not sure how many times I have read the BLUE BOOK, but it must be enough times because I feel sick whenever I open the book. Really.
I also want to openly apologize for involve in the argument with MMX and Chris74 on your website. It just make me feel and look bad.
Thanks, ST.
Ge
ST or GE,
Do you happen to know what % of institutional ownership that O'Neil/IBD consider a stock to be "over-owned"? Is it 70, 80, 90%?
Does the over-owned consideration play in to their sponsership ratings, or is that just based on perceived fund/institutional quality?
Of the most recent IBD top 20, the majority of them have inst. ownership greater than 75%, and they all have pretty poor sponsorship ratings.
Thanks
TEWY,
1). I do not think it is defined by percentage or a definate number. It is not mentioned in blue or white book. Gil Morales, use the example of AOL in 2000 to define the over-owned concept. At that time more than 1000 funds owns AOL, if I remember correct.
2). Sponsorship rating is defined by the mutual fund's performance in the past three years. It also take consideration of the quarterly sequential increase of the number of funds. There is a minor discrepency between bill's blue book and canslim master program regarding sponsorship rating.
Ge
GE,
Thanks for the clarification. That would explain why most of the top stocks in IBD have poor sponsorship ratings right now. They are probably mostly long funds/positions, and thus are getting poor returns overall in this current market.
As for institutional ownership %, I still can't understand why anyone would want to take a new long position in a stock that is already 90%+ inst owned. Many of the IBD top stocks are currently in that category.
GE,
Congrats for passing the exam.
Ge,
What are the names of the books you are calling the blue book and the white book, and where can I buy them?
Thanks!
Tewy,
I can answer part of your question. In 2004 I was at one of O'Neil's conferences in April 2004. It was in Beverly Hills. Someone asked about the sponsorship rating and Bill's answer was that he gives it very little weight during/after a bear market. It's a slow response indicator.
ST, I thought of you after I read this quote...
Bear market corrections tend to travel considerably faster than bear market declines in the primary direction. Thus in a few weeks a bear market rally can wipe out months of bear market losses. It takes a very nimble trader to make money in a bear market rally. Beating the market when it's going against the primary trend is a matter of precise timing. Long ago I gave up trying to take profits out of a bear market correction. I sleep better watching a bear market correction than trying to make money in it. richard russel
MM,
Thanks. That pretty much sums up my thoughts on it too. Quality of life is important.
One other thing that affects my trading that doesn't affect others is the fact that my prospectus spells out very clearly what type of stocks I'll buy and when. (I.e.: Stocks with good fundamentals and technicals moving up out of bases on good volume in an uptrending market.)
I have to hold myself to those basic rules. Following CAN SLIM rules is not optional for me.
I think if we were to see some nice sideways basing action for a week or more, and then break out upwards on good volume - then we can look at holding some positions.
http://www.bigmovingstock.com
ST, I respect your patience and style. I am more active. I cant just sit there and do nothing.
Presentmomentum,
The blue book is Bill's How to Make Money in Stocks, and lots of people use abbreviation HTMMIS for that.
THe white book is Bill's Successful Investors.
Bill's 24 Lessons is also white color, I do not know why that book is not called white book.
That is how the people in Level 4 cocktail party told me last year, so I start to use the name of blue book and white book.
Ge
ST,
THanks.
I am considering L5 and will make my final decision next week. Hope to see you there.
Ge
Just a silly question: Do you really find CANSLIM course useful? Isn't it all there in the two books? Do they teach how to sell short in those courses?
Salman,
1). CANSLIM course is definately usuful.
2). Two books probably just give you a guide, in my opinion. You do get an edge in trading with CANSLIM methodology, in addition, you need to have the trader's mindset and portfolio management, which are covered in level IV. I would refer you to the previous blogs ST posted regarding how hard one have to work in order to be a master in trading. I think that blog was a few month ago. That was an excellent blog.
3). NO, Bill and his PMs did not short in the most recent bear market. They did not teach how to short in level IV recently.
Hope it helps.
Ge
ST,
I have this question for a while and I discussed it with some friends in the IBD meetup, somehow I want to hear your opinion.
I know trading is easy, but making money CONSISTANTLY is extremely hard. Trading for a living will be even harder.
However, in trading, we have to focus 100% on following the rules and NOT let anything else affect the decision in trading.
But.... during trading, do you worry about mortgage payment? bring food to the table? bills to pay? Kids' college tuition? or anything else that will interfere with your focus?
I am sure any of the above worries will likely to make any trader force a trade and not following rules. Be it a catch up trade or a make up trade or an envy trade, but that is going to be a killer.
So, in your trading, how do you manage to isolate all the outside noises and put all your focus purely on trading? HOw not to worry about, for example, pay the bills next month? Especially in this market environment?
I know you have a passion and you pursuit your passion. But for me, even if I have the same passion, I would never dare to do it when thinking of my wife, kids, mortgage.....etc.
Sorry, it maybe a stupid question.
Ge
Hey Ge, what you need to do is have a checking /savings account with enough cash so that you don't worry about bills, payments, etc. You also need to review expenses to see how manageable they are and what could be reduced to help make things more manageable. Most pros own their homes outright (at least the smart ones do) so that they don't have mortgage payments...since housing is probably one's biggest expense that makes a big difference. Hope this helps...
ST, have you had any changes of market opinion based on the last few weeks action? It looks like there are some stocks moving that might be opportunities. Obviously you would have posted but I'm just curious. Have a good one.
GE,
There are a lot of ways to answer your question...
It is best to have at least a few hundred thousand behind you before going full-time.
Trading is never easy, but when you are on your own ful-time or trading/investing for others, you have to be extra careful in managing risk.
Losing money isn't really optional.
Big J,
The future is looking bright...very bright.
ST,
Are you talking about Stock Market? If yes, What is so bright about it? I still see the same old issues (lack of leadership, laggard leading the market) and this to me looks like window dressing.
Salman,
The character of the market has changed. There are stocks out there with good earnings that are setting up or already moving to new highs: MYGN, AIPC, LFT, TNDM, TSYS, etc...Things may get a little volatile as some of this 23%gain gets worked off and consolidates, but I see opportunity ahead.
ST,
Don't forget about ARST. That in my opinion is one of the better (if not best) candidates going forward. It has low institutional ownership relative to the rest, and has a low short interest. That aint short covering moving it up.
I view this rally with real suspiscion. I have my own reasons:
1) I don't want to be what Jesse Livermore calls Ticker-Hound & Chart-Monkey. Disregarding the underlying condition can be dangerous. An underlying conditions are no where near rosy. I see further complications with feds printing the money.
2) Although there are handful of good stocks breaking but there is no industry group that is leading. I am not experienced enough to know how bear market ends (have been in market for just 5 years) but certainly from what I read it doesn't end when beaten-up lagard stocks lead the market and CAN SLI stocks follow their lead.
3) With this thing in mind, I am slowly shorting Financials again because underlying conditions haven't changed. We haven't seen the capitulation yet and the steep rise in stocks definitely indicates a short covering.
Lastly, I don't want to influence your decisions. If you are long and you are profiting, you should definitely continue with the trade.
Tewy,
Right. ARCS looks great. I just threw out a few.
Salman,
You may be right. If you are good. I don't know what the consensus is out there. I haven't watched CNBC or read any newsletters or papers. I'm just watching a quote screen all day and reviewing Daily Graphs charts. So, that's my vantage point. And from that perspective it seems to me that the market has changed character. Stocks are acting better. The market is actign better. It's no longer the same market. There seems to have been a paradigm shift.
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