DJIA Leads The Way As BSC Rocks The Stock Market On Mixed Volume; How Can This Be A Bottom Without A HUGE Surge In Volume On the Nasdaq And NYSE? It Can’t Be!
March 17, 2008
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Stocks gapped lower after a horrible announcement by JPM that they bought BSC for $2 a share. Now, while I don’t want to gloat on this, I just want to say that for the 100th time in my life I have warned a bunch of traders to not buy a certain stock and yet they still do it. There was one reader from Santa Barbara from RealMoney.com that attacked me 8 days ago for telling him BSC was a POS. Well here we are from $75 to $4 and yet still no apology. No, thank you. No, I am sorry. Just a big pile of nothing. From Eugj to BHCO to Gerard to WillPS to SCO to Geoffrey from Santa Barbara: all of these characters have called me out and told me that I did not know what they were doing and EVERY SINGLE TIME THEY WERE PROVEN WRONG AND EVERY SINGLE TIME I DIDN’T RECEIVE A SINGLE I AM SORRY OR THANK YOU. Is this what our world has come to? 
Oh well, there is no doubt I have become a sensitive character in my old age and things like this bugs me now. I just don’t know how yet to act when it comes to responding to jackoffs that make themselves out to be major idiots. I guess I will learn to ignore it in the future. The exact same way I ignore going long any stock below the 50 day moving average or go short stocks above the 50 DMA.
What is very odd about today that sticks out like a soar thumb is that volume was very lame. Overall, the panic that I witnessed last night in the yahoo message boards about BSC, was completely uncalled for. After hearing of horror margin call, divorce, and other stories, I started to think we could have a crash. When I looked at the sentiment indicators already being so bearish (which is bullish) but yet there were no stocks confirming that this was going to lead to a move higher, I knew that it was possible this could be our 1987. But just like every extreme situation, the damage was contained just to the banks and at the closing bell the DJIA proved why panic selling never works.
I guess I am going to attack today’s post differently considering the nature of the BSC announcement and the reaction by the market. On the DJIA chart I see the average is still abvove the January and March highs and that we have three strong accumulation days out of the past five sessions. This is a pretty bullish development by this index. However, this index always holds up better than the rest so it is pretty much just a flight to quality. You can see back in the bear of 2000-2002 that this index rarely led to the downside. So this relative strength, imo, is just confirmation of the weakness in the market.
The SP 500 has cut the lows of January but still rallied back to hold support. This is a bit of a bullish development on the short term but when I look at the daily chart and see the slope of the 50 day moving average and the angle of the decent I am very discouraged that a rally from here can carry any real power. The 200 day moving average is in a downtrend right behind the 50 DMA and there is no way I can see this index righting itself anytime soon. As for a bottom, you can forget it. Look at the volume compared to the January lows. No way, bottom callers.
The Nasdaq is very interesting as such a horrible gap lower, you would have thought, would have led to a massive volume surge. However, volume came in below the 50 day volume average which absolutely blew me away. The fact something like this happened and volume was lower can only mean one thing: we have more lows to go. There is no way we are going to bottom without a major surge in fear. And lower volume on the Nasdaq is not my idea of a surge in fear.
Another thing that is not my idea of extreme fear is what happened with the VIX and put/call. The VIX, despite all the insanity I saw last night, only hit 35.60 and closed at 32.24. This is not the level that we historically see at bottoms. We are very close but if you know anyone who thinks “THIS TIME” it is the bottom, slap them in the face with a chart of the VIX going back to at least 1987. However, 32 is the highest close in almost a full five years and that has me very happy. However, happy does not equal buying stocks.
The put/call ratio spiked today to a very high reading of 1.41. However, I am not sure what it hit intraday, but really, it doesn’t matter. What matters is the close and when we look at the put/call today compared to the 1.59 and 1.65 readings back in January it is clear to see that the crowd was making more bearish bets then than on today. So, once again, we have another indicator, that though it seems bad, is really not that extreme. So this, with the VIX, the lame bullish reversal, and weak volume all point to a market not washed out yet.
Now all of you know, by now, that I have been advocating cash for months. As the month of February and March went along and finding good short setups and having them work became harder it was clear to see that the smartest thing to do was to raise cash. So after nibbling on some nice shorts, I started to raise my cash position. I raise those cash positions for moments like this.
These big selloffs if they happen correctly usually lead to a very powerful oversold rally that helps produce some nice stocks in a short period of time. However, when those selloffs happen with volume being lame lame lame and no charts showing up, you know it is time to just keep that cash heavy.
Now, two things can happen. One is obviously that we can continue to selloff and look to short stocks. But if that was to happen right now, we simply are not going to find many that can be put out short. The market has fallen too far too fast sending too many stocks past their reasonable areas of getting short. Most of the past big winners to become great shorts would need MONTHS!!! of a low volume rally to set them up. The fact stocks like GOOG and AAPL imploded without giving anyone a chance to enter a large position is just some of the reasons it was hard to short an make a lot of money. But if this market gets ugly, trust me there will be plenty of low volume rallies that will lead to chances to get more short if the trend is down.
The second possibility I am looking for the market to put in for me to get bullish again is to hold these levels the next three days and then to have the market put in a follow-through day where the market is up at least 2% on much higher volume. But for me to want to get long I then need to see a lot of charts that look like either NEU or GTU showing up everywhere. If I get this I would love to get long and start hammering out some big gains that we are now closer to getting with a VIX at 35.
However, the chances of me getting this is very thing I feel as the technical damage is amazingly disgusting and it is going to take a very long time to fix the mess that is now out there. I don’t think that will be anytime soon but God willing let it happen tomorrow. I love to make a lot of money in the market and I miss my max green BOP charts like my last one AFSI in April 2007 to July 2007. So if I can get this I am more than willing to get very long and be very happy about it. But I am an honest man and I don’t see that happening any time soon.
I see the macro data, I saw the Fed, YET AGAIN, place an emergency cut on the lending rate to financial institutions to 3.25% from 3.5%, I saw BSC, LEH, NCC, MF, UBS, and FCSX, and after seeing all of this I have come to the conclusion that we are in some serious trouble but that means only one thing. We need to be looking for a rally.
But looking for a rally, I repeat, is not the same thing as going long. Remember, we are waiting for a follow-through day, the very nice charts, and the sentiment indicators to all line up. Until all of this happens, there is not going to be anything we can do but hold ourselves in a lot of cash and/or let the professionals continue to operate on the short side. This is just the way it is. Forcing trades here is the last thing you want to do. Pushing for anything that the market is not giving you is the way of the amateur.
I saw a new reader place a comment that they went long FCSX as it fell today and learned a very big lesson today. My only problem with this is why did you not listen to my commentary? If that wasn’t going to do it, my bigger problem is why are you buying anything that does NOT look like my past big winners? This is the thing that drives me crazy.
Now, I know that we do not have a lot of near-perfect charts out there (NEU and GTU) and that usually even when we do they fail fast. But the thing to know is that the last one that worked was APPY back in September. Go take a look at that chart NOW! In one month APPY rallied 130%, despite the VIX being below 20. This shows you the power of this pattern. The last one we loaded up on was AFSI in April 2007. That was when the VIX was below 15! and it still produced a 75% to 83% gain in a little under three months. These are great returns and are typical of perfect charts in bad markets (minus the 5 that we cut our losses on this year; INXI BYI BLL SNDA ESEA). Two right and five wrong in THE WORST YEAR FOR NEAR-PERFECT TO PERFECT CHARTS and they still produced for you a 100% gain. Do you see why it is so important to be very right and be a little wrong when you are wrong?
Then why do you buy FCSX? Oh well, I know this trader has a great attitude and I know this will be a lesson worth learning. The great news, hopefully, is that you kept it smart, since I have been emphasizing that and therefore you will be ready for the next long that is the opposite of FCSX.
Another market related item you might want to ignore is the opinions of the dumb asses on wall street. There were five of 15 donkeys that rated BSC a buy. How many do you think rated it as a sell? That is right! NONE! 
This is just another example of making sure that you never listen to wall street. You can be sure they did not have your best interest in mind.
And since we are speaking of best interest in our mind. We might at well talk about the interest rates that Ben is going to butcher at the next meeting by slashing the 3% rate to 2%. Even though oil fell quite a bit today, I still have no confidence that today is a top in commodity prices and am very nervous about this move. Of course the argument is that higher inflation is better for us than a weaker economy but I think both are pretty bad and since the last time we had this was in the late 60s to early 80s, I recommend every investor go back in time and study that Fed and the market they reigned over.
I am extremely happy today after seeing so many new people subscribe today and so many of my current subscribers thank me for saving/making them a lot of money, while we watched a lot of people go broke today. Anyone that read some of the stuff in the yahoo message board on BSC and doesn’t feel bad, shame on you. My initial pleasure in being right was replaced by a severe disappointment that so many people f’ed up once again. The lure of buying a cheap stock or getting a bargain has ruined them again. I have no clue when these people will learn but hopefully they will soon.
And if you are one of those donkeys (if you bought stocks as this market sold off you need to stand up, and just like an AA meeting, you need to stand up and admit you are a donkey and immdieately head over to my ‘past big winners’ area on my website. If you do not go there and buy stocks tomorrow that are in a downtrend and then lose all or you money I will be happy because in the USA those who are rewarded do their homework, research, and know what they are getting involved with. Those that think getting rich quick in the stock market is the only way to play it deserve to lose it all. For those that went from 100k to -33k by being on margin, all I have to say is you deserve it, if you bought the stock recently.
If you were a shareholder in the company and had no clue about the market like the Enron investors, then God bless you. I am so sorry for what has happened. This is why I hate wall street and believe the fools that feed you advice have only one thing in their interest and that is making a lot of money off of your constant commissions for their brokers. That money then sloshes its way all around wall street and everyone can line everyones pockets.
For those that have just joined up with this team, get ready to start making and keeping your money and do know this if you are here and after a long period of time you see no progress…..this game SERIOUSLY isn’t for you. NO ONE, who learns the CANSLIM system should EVER burn out or go broke. The only people that go broke are the idiots that bottom fish. Don’t be a donkey and don’t be an idiot. Geoffrey from Santa Barbera, BHCO an ex blogger, Eugj from Investors Paradise, Gerard from Brooklyn, SCO a coward who made a comment on my site, and Frank a subscriber who is in love with a pathetic stock called HNSN have all learned expensive lessons and all could have cost you a lot of money. Would any of them ever take responsibility or apologize for their actions? Of course not! Frank is already sending out an email to my partner in crime telling him “THIS TIME THIS IS THE BOTTOM.”
ROFLMFAO. These wall street donkeys never learn!!! Aloha and I will see you in the chat room where there is only one donkey in the room: ME!!! That is unless Frank shows up. 
Last 5 posts in Bronze Commentary
- Comments Are From Now On Closed Forever; They Will NEVER Be Open Again - October 24th, 2008
- FAQ - March 27th, 2008
- There Sure Is A Lot Bullishness Out There After Today's Huge Lame Bounce; Real Bottoms Come With Volume, Unlike What Cramer Tells You (How Often Is He Wrong?) - March 18th, 2008
- BSC Blowup Proves A Chronic Emailer Wrong And, Once Again, Proves The Power Of CANSLIM; Stock Market Indexes Selloff On Mixed Volume But Hold Recent Lows - March 14th, 2008
- Time To Look For A Follow-Through Day, After Today's Bullish Reversal Off The Morning Lows; Metal Ore/Gold/Silver And Select Oil&Gas Stocks Are Our Leaders - March 13th, 2008
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i just thought this was worth new investors reading as i know one of the biggest mistakes investors make is listening to media, especially when some well known investor (ie- Buffett, Soros,Steven Cohen, Eddie Lampert, or whoever the flavor of the month is,etc….supposedly buys a stock and you think oh well if they bought it then it must be a good deal….)
http://news.yahoo.com/s/nm/20080317/bs_nm/bearstearns_joelewis_dc
Hey Joshua
I must admit that though my login name for most investment forums is theSurfbird, my real name is Geoffrey and I live and surf in Santa Barbara…but I guess there are two of us in this town and I’d like to apologize for the donkey that shares my name.
Thanks to you I’ve been 80% cash since January and have had some big gains with only about 10% long and 10% short. I am mostly just waiting for some max green BOP.
Thanks for all that you do, and forget about those idiots.
If you are ever in Santa Barbara we’ll go for a surf and the sets at Rincon will prove that this town isn’t so bad.
peace
surfbird
That would be great. There is another great subscriber from Santa Barbara that works for IBD. I LOVE SB. I went there two years ago. HOT city.
Yeah Geoffrey Lennart was unlike anyone else I have yet met, besides this guy named EugJ from InvestorsParadise. Man that guy HATED ME. He was 78 though and was mad at a lot of things though.
Yeah, Rincon! Those sets on the swells you received lit that place up. The photos on surfline.com were amazing!!! What a great swell that was. Best in a decade for you guys. I would love to surf that spot. It might be to localized but any spot will do. All of your breaks are better than every break on Maui (minus 4-5 spots) so anything will do!
But thank you. Yeah I try not to sweat them but dang it they never fess up. I always admit my HUGE mistakes. Like with UDRL. Sure I could have hid from it because it was small but I knew that someone bought a little of it and someone wanted an explanation I am sure.
I guess I care more than some. But thank you very much, surfbird. It means a lot.
To the Big Dawg at Big Wave:
Just yesterday, I was going through my emails and ran across one from The Street that said Cramers Take: Bear Not Insolvent. It was dated 3/11/08 and I went to the sight to watch a video where Cramer, in his own f’ing words, said that the information he had said that Bear is not insolvent. He went on to straight up support BSC. I went to check the stock price on 3/11………$60.
You are the man, homie! Nuff said. Nuff said. And feel free to quote me on that one.
Big Juan
Funny thing, Juan. I got into a fight with an editor at RM.com and he said that Cramer was great. I told him he gets more views because he is known. But Cramer is old money and the new money is getting shunned to the side on your site. I told him it would be the downfall of TSCM. But I love that site and want to try to stop it from becoming a complete joke that is how closely become.
The problem there, like so many other places, in big business or wall street is that they can’t see outside manhattan. they only see what they want to see on their island. it is not good over there and if they think the money is in cramer and kass they are in for a very rude surprise. but somehow i dont think they care.
Ah yes, Eugj. The single reason I never posted or spent any time on InvestorsParadise. That guy acted like he owned every message board over there and you had to agree with him, or else. Very unpleasant. I wonder what became of him - is he still trading do you think?
Wow, Ian. You have been with me that long! Incredible!! Thank you. I wonder if he is still over there. I will go take a look later on. But this man was very rude and mean to me and I NEVER did anything. I think he saw it as me stepping in on “his turf” which I was more than willing to share; he wasn’t.
He let us know that FRPT was one to hold forever as it was a great company. When we did not agree we were figured to be morons. Since his recommendation the stock is down 80%. I am sure he is still long.