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Wednesday, October 05, 2005
Market Recap
Today the markets suffered a brutal sell off as the bears came to feast on the bulls who lost control of the market yesterday afternoon. The bears spared nobody, rolling over every stock in their path. Avian Flu fears and how it may affect our global economy and business could be part of the reason for the sell off on Wall Street today. Today was the second high volume distribution day in a row and this heavy follow through selling is conformation that the short term trend has changed. The DOW was down 123 points on the day. The NASDAQ suffered its worst one day loss in many months with a 36 point loss and the S&P was hit for an 18 point loss. Both the NASDAQ and S&P lost over 1.5% of their value and that can be classified as a brutal sell off in my book.
Warning Was Given
It should come as no surprise to see this selling pressure, considering the economic conditions and a number of other reasons all mentioned in our commentary over the last few days. Rate hikes are going to continue, the indices were at a resistance level and a pullback was due. Also, the end of quarter window dressing was over and I mentioned that selling would probably occur afterward. Last week I mentioned that funds were window dressing their portfolios with the 3rd quarter winners in the last week of trading in the 3rd quarter. I also said that these leaders could very well sell off in the first week of the 4th quarter as many of these fund managers would probably sell these leaders and rotate to some new potential leaders. We are seeing exactly that in the oil stocks as this group is getting hammered over the last couple of days, however there does not seem to be any rotation into other stocks at this point. This is just flat out selling with no buyers in site.
Protect Your Capital, #1 Rule
This reversal occurred on higher volume, with the NASDAQ trading over 2 billion shares and as selling escalated into the close. For the past couple of commentaries, we have suggested caution and to lighten up and go to cash. It looks as though this was the right advice. You need to be vigilant and practice good risk management, cutting losses quickly and being careful about holding long positions overnight. Today, we got pounded on HGSI with bad news. This is the danger of holding stocks overnight. FTO is eating our lunch also, but this is an oil stock that should bounce soon.
These two got away from us. There was nothing we could do about HGSI but there is no excuse for FTO. That should have been sold with a 2% stop. These things happen, we all make mistakes. We will get through these trades as we always do. In the end, our portfolio is out performing the market by a wide margin this year. We believe in being in only the strongest stocks in the market but even the strongest stocks can get hit hard during market corrections, so do not hesitate to step aside when the selling volume gets heavy. Cash is king and protecting your precious capital is the only way to survive in this business. The single most important rule of successful trading is to protect your capital; without it you are out of business.
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
Stockcharts Listing
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http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting.
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