Well I am about as upset as the next guy about this rally turning into what it has now turned into–a reversal of a breakout to a breakdown. After speaking with a great trader tonight, who also has a stellar long-term record, I am now comfortable with the thoughts that I have recently had about the market.
What are those thoughts? That this market is pure trash. Folks I don’t know how to put this any other way but this is clear bear market action. You do not see key indexes take out key moving averages (like the Nassy taking out the 200 DMA four days ago, etc..) and then immediately fail them and reverse and then breakdown right through another key moving average. This is simply not bullish action.
But, imo, what makes this worse is that the market is still not clear at all. Just last week the market appeared to be properly climbing the wall-of-worry that the media was creating. On top of that, “hot” charts started to show up again setting up in bases that I have seen before that lead to huge gains. But, once again, just like in 2007, these charts either fail immediately or STILL after producing quick gains reverses and loses nearly all of them.
This is not how a bullish market works. What makes this so odd for me is that it seems that the put/call ratio is pretty hight at 1.11, the VIX has jumped to 24, the bears did take out the bulls a few months ago on the investors intelligence list, and the IBD economic index is at its lowest level ever. You would think with readings jumping all over the place that the market would be rallying. But instead I am just watching stock after stock lose its momentum.
What is making all of this worse for me is that the best looking charts with the best fundamentals are getting hit the hardest. There is not much I can say about this but the proof is in the evidence of my current holdings. When I started this week, I came into Monday holding a 34% gain for the year which was clearly much better than everyone else. However, my largest 10 holdings have all come under vicious attacks WITH ALMOST ALL OF THEM GIVING ABSOLUTELY NO PROFIT TAKING/SELL SIGNALS. I don’t know how many of you out there that read this understand the methodology that I use but the fact that the best looking longs with the best fundamentals are getting whacked is about as loud a signal as I can get that I need to jump out of the market.
In fact, even though I still have MANY holdings (because they are ALL HOLDING key support areas or moving averages) and some of them still look really good the problem is that they have all given back a majority of their gains. Not only that but one of my largest additional buys pulled back so calmly and on such low volume that by the time I got my sell signal I completely FAILED TO REALIZE the pain I produced for myself. That culprit was VISN.
