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Wednesday, April 28, 2004
Market Recap
Well, what can I say accept to borrow a quote from our friends down under, “It was a bloody day in the markets today, mate.” At the risk of sounding like a broken record, the NASDAQ is trend-less and simply can not find direction. I had a chart of the NASDAQ last night and stated that “we would need to see a break above the neck line of the inverse head and shoulder formation before this market can advance. If we cannot break above this level (2075) then every rally attempt will fail.” The NASDAQ was down 42 points, closing back below the 50 SMA and below the psychological 2000 level. The Dow was also down 135 points. Both indexes closed near their lows of the day.
The Moving Averages
The 200 SMA is 1932 tonight on the NASDAQ, and we are 57 points above it. Just when things start to look good, the market turns on us. It has done this many times this year so we should not be surprised at the action we are seeing. The Dow requires a drop of nearly 400 points to reach its 200 SMA so let's hope that is not in the cards.
New Stocks for the Bulletin
With today's sell off, there are no new stocks to add to the Bulletin. With so many stocks collapsing out of the blue, it seems that all cash is the best option, unless you own stocks that are in extremely strong up trends. If you own stocks that are making new highs twice a week then you do not necessarily need to go to cash. It all depends on how strong your stocks are acting through this turbulence. If your stock is not within 10% of its 52 week high, it will be susceptible to a severe breakdown in this market.
Use the following rule if you decide to trade this market: every stock that crosses a trend line or a support/resistance area either up or down must exhibit a quick surge in price through the line with volume after the penetration of the area. If this does not happen, you must exit the position as soon as possible as it will likely fail.
Trading Styles for the Market
You may have noticed that I have been trading more than I normally would. In this type of market you can do one of two things. Option one is to sit on your hands and hold your cash until the breakout comes. Option two is to trade the pullbacks and try to make a quick 10 or 20% on bounces. I have opted to choose option two. Trading pullbacks requires cutting losses quickly if the trade fails. This is a very aggressive trading style so I would recommend you not to trade the Alerts if you cannot be by your computers to closely monitor your trades.
Cash is (Still) King
I have chosen this style because we have been in a market that has traded sideways for the last 4 months and we can not make money sitting in cash. Cash is still king, and I recommend holding a large cash position rather than being in the market if you cannot trade aggressively. I choose to take money out of the market and the only way to do that now is to trade aggressively.
Trade Record Update
Our Trade Record as of today is now up 20% in 2004, locking in 10-20% gains while trying to minimize losses to less than 5%. This is not our best performance when compared to last year's gains, but we are in a very different market so far this year. We have to take what we are given, and we have not been dealt a very good hand. However, we are doing very well considering the market conditions we face. Compare our performance with the NASDAQ and you will find that the NASDAQ is now down 1% for the year. Our 20% gain looks very good in comparison.
A Last Word
Proceed with caution and remember: your cash is your gold, do not risk it in this unstable market until things get better. I can not guarantee that the market will go up (nobody can) but history is on our side and I know that in time the Bull will return. There are only three guarantees in life: death, taxes, and the Boston Red Sox not winning the World Series. There is no guarantee in the market, but odds are that it will eventually go up. Hang in there folks, life is grand.
As always, thank-you for your support past, present and future! Have a great night everyone; we will see you all Tomorrow evening.
OTC BB Watch List
- None tonight
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