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Wednesday, May 19, 2004
Good evening friends,
Market Recap
If you are familiar with the “bait and switch”, today we witnessed the market's version - “Bull and switch”. Today was a brutal turn-a-round for the market that caught many people trying to chase stocks higher. The futures were up solidly and the markets started out of the gate this morning like the grey hounds at your local dog track. But the morning rally could not be sustained, and the volume was again not there to keep stock prices afloat.
By the end of the day, the Dow fell 150 points from its high and closed near the lows of the day. The NASDAQ had a 38 point swing and closed at its low for the day. Today's action was very bearish. Anytime stocks gap up and can not hold their gains, it means there are no buyers and people are selling the strength. There is just no reason to buy stocks in this market. I mentioned last night, when I reviewed the charts of our short positions, I said to myself, “there really is no reason to cover them”.
Our Short Positions
We have 18 short positions. All of the stocks we are short have terrible charts, and until we see buyers coming in with conviction (massive volume), I am happy with our positions. I covered a few today only because we were over exposed to the short side, and I could not take the chance today's fluke rally kept going up. With the markets staging an end of day collapse, I think there is a good chance of continued selling tomorrow.
You Must Short or Abort
As I mentioned last night, I am not a bear, I really do not want to see the markets go down. The big money is made on the long side, but we can not make the market go up. The market will do what it does, and we have no control over its direction. All we can do is go with the trend, and right now, the trend is down. We can always sit out and preserve our cash, but I like to take every inch the market will give me and if making a few percentage points on the short side is all it will let us have, then we have to take it.
I certainly would not be buying any new long positions right now. Cash is king and if you must trade, trade on the short side. The charts have proven this to be profitable over the last few weeks. Remember it like this, “you must short or abort”
The Sun will Shine Again
There are quite a few investors out there who are watching their portfolios ride off into the sunset because they refuse to be on the sidelines. Unfortunately, that horse is gone and it is taking a fair portion of their cash with it. They are long in the market no matter what the direction is and left wondering why their portfolio values are withering away.
In times like this I say, “sell and sit it out, cash is king”. Why be in a hurry to give away cash? We cannot force the market's direction. If we can not trade short, we should be sitting out and stockpiling our cash for better market conditions. We are still sitting tall in the saddle of our horse, and we are keeping the outlaws (i.e. market “professionals”) at bay with our short positions.
As with a setting sun, the sun will rise again on the market. It may not happen tomorrow. It may not happen this week, or even this month but, eventually at some point the sun will rise again. The real buyers will be drawn back into the market (not this fake stuff we have been seeing lately). Stocks will be in favor again, and all of this negativity in the marketplace will vanish like the early morning fog.
We are perfectly positioned. We are loaded up on short positions as the market heads south and it is worked out quite well. Not only have we been able to preserve capital, but we are making money as the stocks move lower.
At some point, the market will bottom out. We may not see a huge reversal in the market, because so many charts are broken at this time. It will take time and a lot of buyers to get things back into shape. Buyers are on strike and these low volume rallies just cannot hold up. The stocks that are weathering the storm will be the leaders when the markets finally do turn for the better.
Even after the market crash in 1987 and again with the internet bubble, eventually the buyers came back, and the markets moved up. That day will come again, we just need to stay in the saddle, keep steering our horse in the right direction, and focus on the charts. When the markets do turn, we will be well positioned to profit again and our horse will run wild with the buyers stampeding in behind us.
Bulletin Update
Better times are coming but for now, there are no stocks to add to our list tonight. I know you all want some plays but if there are none worth adding, I will not force any into the Bulletin.
Joke of the Week
There are primarily 3 different types of investors who post on Yahoo message boards.
1) Those who don't know anything
2) Those who don't know much
3) Those who don't know they don't know
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
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