Well there is absolutely nothing else that can describe Friday other than pure utter disappointment. I am telling you right now that the odds of us starting another leg lower has increased by leaps and bounds after Friday’s breakdown. Why? Because something that happened this time last happened in 2000. After an initial breakdown, some stocks recovered and some created very bullish chart patterns. After initially working, they soon all reversed as around August 2000 the stock market then resumed its trend lower. There is nothing that says that we are going to have a bear market like we did in 2000. However, the 10 new shorts that I have for Monday have the EXACT SAME PATTERNS that I saw in August to September of 2000.
What is that pattern? After years-and-years-and-years of price gains (most stocks now are from 2002-2008–six year uptrends) the stocks started to chop around creating a churning area that many amateurs mistake as bases. What these amateurs failed to notice was that those bases were created on HUGE volume, unlike anything that had occurred before that time frame. If you are a subscriber go take a look at those long term charts that I posted. I post those charts to show you the whole previous uptrend, show you the rolling over churning action on much heavier volume, and then you can go and look at your own charts at home and see the breakdown with my detailed analysis. These charts sure do look like the same charts in technology stocks with no earnings back in 2000. There is no difference in chart patterns. Only the stock names are different. The really scary part, this time, is that it is not money losing internet companies…it is money losing banks. This is sort of scary.
However, fear is just what a market needs to bottom. Is my fear of a bear market the perfect contrarian signal? I hope so! Trust me, going long my beautiful green charts and making a lot of money in stocks like QTWW or PDO on their most recent uptrends is much better than going short stocks from November to January and making 50% on CBEY SIGM and a few others. The most you can make on a short is 99.9% and the most you can make in a long so far is 80,000% (CSCO). I like my odds with the longs. Especially, considering you can find no money losing 20-year period in the stock market since 1880. Being long is what I like to do. However, if the market is moving lower and offering me up charts like it did on Friday, I must start to focus on the long side.
That is especially the case given that volume exploded higher on this huge breakdown day. Everyone will say volume is quadruple witching and that the selling isn’t real. But these are the same people that were just telling me a couple of months ago that the high volume on the quadruple witching that led to the FTD was real. Whatever. It is what it is: a much higher volume selloff.
