Nasty Selloff Comes Just As I Expected; I Am Still Waiting For A Huge Up Day On Huge Volume To Confirm This Move Is Real
August 18, 2008
It really is hard for me to find much to pen about here other than “I told you so.” Those that do not learn from history are doomed to repeat its failures and those that have not learned that NOT EVERY FOLLOW-THROUGH DAY LEADS TO A BULL MARKET BUT NO BULL MARKET HAS EVER STARTED WITHOUT ONE are going to have a tough time living through this bear.
The great news, some can say, is that volume was much smaller than what I would like to see on such a nasty day. Now, this could be good news or bad news. It could be good news as that the weak volume selloffs could be met by higher volume accumulation. However, I doubt this will happen since the rally that preceded the 200 DMA breakout on the Nasdaq was on lower volume. So it just remains a big choppy low volume range bound market to me.
The negative is that a lot of times in history low volume selling has started off some major declines and only after the selling becomes apparent and painful does the heavy volume selling hit the market. So that is something to think about as the stock market indexes come upon failed breakouts and tough resistance.
A reason I believe our low volume selling can start of low and pickup the selling and we will not rally has to deal with an index chart somewhere far away from the USA. I know we are two different countries but there is no doubt the Chinese stock market is the leading stock market. Those that do not have access to a chart (SSEC-X on TCNet) may not know but the index is ONCE AGAIN, for the fifth time at least since the November top, rolling over to new 52-week lows. Now this index is not just barely making new lows. This index is dropping hard. Dropping another 5.33% after earlier dropping 4.47% and 5.2% in back to back bloodbath sessions. Since the top in November, the SSEC-X (Shanghai Se Composite Index) has dropped an incredible 58%!!
This was the leading index during the previous bull market of 2003 to 2007 and now it is leading us lower. The USA I would assume is going to follow this index down, until the Chinese index turns around. NOW, this does not mean I expect us to lose 58%. But I wouldn’t think the January, March, and July lows are safe either. I have no pretty charts, I have no CANSLIM stocks setting up in proper bases, and I see absolutely NO new leadership outside medical. You tell me how we will have a bull market from that.
I have recently created a few videos that help show you this market compared to the REAL BOTTOMS of 2002 and 2003. Those that watch the video and listen closely and watch the follow up videos and study all those PAST BIG WINNERS that have such green charts it should become clear as day that our market is far from over from the pain that losses can inflict on one’s portfolio.
I still am hearing horror story of traders trying to trade this market. I am sick of saying it but STOP IT! STOP TRADING. CASH IS KING in a market where the Nasdaq has moved a WHOLE -0.03% from January 15, 2008 to August 18, 2008. How do you expect to make money going long or going short ANY amount of time frame in a market that is moving nowhere.
Some like to say “but Joshua, what if I shorted FNM or FRE.” Good for you! Go for it! I am a disciplined trader and I do not adapt my style that has worked for me since 1996 and super successfully since 1999. I lived through early 2002 to October 2002 and that was a very hard time to make money. But I have to admit the NON-ACTION in the market has made it the MOST DIFFICULT year for me. However, it has also been the most mentally rewarding because I have learned that I can recognize all market conditions and adapt accordingly without losing money.
I have lived through 1999, 2003, and 2004 and have made BIG MONEY during each year so I know how to act in market where I have to go all-in. But I recognize flat and dangerous markets and that is what we have RIGHT NOW. This could change now. Hopefully we can start a trend down. “But Joshua, why not up?” Because the charts are UGLY. You can NOT start an uptrend from this kind of setup.
I have posted three test videos with two on follow-through days and one on MPWR and how so many of you could have gone long such a ridiculous chart compared to a winner like XSI. There will be other videos that I will make comparing today’s “leading stocks” (which are not much of leaders at all) compared to how the “leading” stocks of 2002/2003 looked. I think subscribers will learn VERY FAST that bull market look COMPLETELY different than markets now.
Those that are telling you to buy the dips have a vested interest in the Wall Street crowd. I used to work for a website that only tollerated those that toed the Cramer line. I refuse to do that. I still believe he is harmful for the average individual investor and I want to personally thank everyone that reads this and that can see through the lies on CNBC and now exposed 8/10’s of the time on a site I once LOVED and worked for. Sad times we are living in. I have never seen so many “smart” people tell people to buy such clearly falling stocks. Bad medicine. But as long as they scratch someones back, someone is scratching theirs. I love Capitalism but it is crap like that that helped turn Capitalism into a greed chase. All everyone that subscribes seems to want to do is “MAKE MONEY NOW.”
Folks, now is not the time. I will ask you one more time. Where were you in 1999, 1003, 2004, 2005, 2006, or even early 2007? Now you want to trade stocks after the uptrend has come AND GONE? This is so like 2000. I just PRAY it is not anything like it.
Aloha and I will see all my subscribers in the chat room where hopefully we can make another video for you guys to enjoy! 
ALOHA!
Another Reason To Ignore Earnings Estimates
August 18, 2008
Felix Salmon submits:
Baruch thinks that sell-side analysts deliberately game the earnings-expectations system:
Analysts with buy ratings on a stock will have lower earnings numbers going into quarters than their peers, so they don’t inadvertently raise the average of published sell side expectations, "the consensus number" as calculated by Bloomberg or Reuters.
Another Reason To Ignore Earnings Estimates
How Does Barron’s Move the Market?
August 18, 2008
Felix Salmon submits:
Seeking Alpha (twice), Colin Barr, Stacy-Marie Ishmael, and many others have blamed today’s price action in Fannie and Freddie — they’re down about 20% apiece, albeit from a very low level — on an article which appeared over the weekend in Barrons. I saw the article too, it didn’t seem to have anything new in it, and these are very dangerous levels at which to put on a short. So who’s selling?
At this point if you’re a long-term buy-and-hold investor you might as well stay in, you’ve lost the vast majority of your money anyway. And the bond markets didn’t seem to care too much about the Barrons article: according to John Jansen the agencies’ spreads widened out only about 5bp. So while I’m willing to believe in theory that it was the Barrons article which was responsible for the sell-off, I have to admit that the mechanism by which such price action happens defeats me.
How Does Barron’s Move the Market?
Financial Drag - Fast Money Recap (8/18/08)
August 18, 2008
Recap of CNBC’s Fast Money, Monday August 18.<!–
Financials Drag Markets Down – Fannie Mae (FNM), Freddie Mac (FRE), Goldman Sachs (GS)
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Financial Drag - Fast Money Recap (8/18/08)
The Olympics Index: Impact of the Games
August 18, 2008
FP Trading Desk submits:
The Olympics tends to be a time when most people tend to kick back and plant themselves in front of the television and take on the role of armchair sportscaster as they cheer on their favourite athletes. As for the impact of the Olympics on investor behavior, HSBC Senior Equity analyst Douglas Rowat points out that much has been written on how mood can change how we react to the markets. For example, markets in a nation’s home country tend to trade down the day after a defeat at a major soccer tournament.
Mr. Rowat decided to test the theory against previous Olympics and its impact, if any, on the performance of the benchmark S&P 500 Index of the New York Stock Exchange. What he found is that in four of the past five Games, the S&P 500 had a positive gain, an average of 1.6% during the two-week period. “The one down year – the 2000 Games in Sydney – was probably a result of the collapsing internet sector, which even the most positive investor moods wouldn’t have been able to overcome.” Mr. Rowat also tested S&P 500 performance during the 1972 Games in Munich, which was marred by terrorism. “Sure enough,” said Mr. Rowat, “the S&P 500 declined by 1.1% during these Games.”
The Olympics Index: Impact of the Games
The August Doldrums Are Here
August 18, 2008
Jordan Kahn submits:
The market action was decidedly negative today, but volume ran extremely light. This is likely an indication that the August doldrums are here, when most traders take time off from the market and squeeze in a summer vacation.
There were less than 1 billion shares traded on the NYSE today, which is very light. But although volume was light, angst was high among investors. The volatility index [VIX] spiked +7.2%, the ARMS Index closed at 2.04, and the put/call ratio closed at 1.05. All of these are very elevated levels.
Supermodels Are Outperforming the Dow
August 18, 2008
Stockerblog submits:
Three top celebrities, Gisele Bündchen, Heidi Klum, and Angelina Jolie, all of which have had celebrity stock indexes created by Fred Fuld at Stockerblog.com and implemented at Stockpickr.com, have had their indexes updated and compared to the Dow Jones Industrial Average. The one thing that these three women have in common, other than the fact that they are wealthy, successful celebrities (two supermodels and one movie star who was also a model), is that all three of their indexes have outperformed the Dow over the last six months.
Their indexes are based on the companies that they are connected to in some way, such as acting as celebrity spokesperson. Over the last six months, Gisele Bündchen’s index was up 1.6%, Heidi Klum’s index was down only 0.7%, and Angelina Jolie’s index was down 10%, yet all were better than the Dow, which was down 10.3%. Their portfolios are as follows:
Supermodels Are Outperforming the Dow
10 Reasons To Look at 10 Oregon Stocks
August 18, 2008
Stockerblog submits:
When you think of Oregon, you don’t normally think of the stock market. However, Portland is the home of a couple of well known Fortune 500 companies. Here are some interesting facts about Oregon:
1. Oregon has no sales tax.
2. It produces 95% of the domestic hazelnuts in the United States.
3. It is the third largest producer of wine in the U.S. with 303 wineries.
4. It is the largest producer of softwood lumber in the U.S.
5. It has one of the largest salmon-fishing industries in the world.
7. Portland has the largest number of breweries of any city in the world.
7. Oregon has the 27th largest Gross State Product in the U.S.
8. Oregon is one of six states with a revenue limit.
9. 55% of state revenues are spent on public education.
10. Last year, Moodys increased Oregon’s general obligation bond ratings to Aa2 from Aa3.
10 Reasons To Look at 10 Oregon Stocks
Three Videos Are Up At BWT.COM For Subscribers Only…
August 18, 2008
…the first is a video about how ugly MPWR was and how I would never go long such a stock like that and how all of you that did go long confused me with your comments “but it was a nice chart.” LOL. Funny. It was NO WHERE NICE and this video will prove it by comparing it to a stock that is nice.
The second video is just a quick take on the current rally and the previous selloff and why this bear marker rally, that is now failing, will do just that: fail.
The third video is about the follow-through days of 2002 and 2003 and how STRONG THEY WERE compared to our weak rally now.
Click on Joshua Live! for the three videos.
Enjoy. I will be producing another one tonight that will compare this rally to the real rallies of 99, 02, 03, 04, 05, 06, and even how the 07 rally worked.
ALOHA!!!! I hope the videos are a nice feature for members with GOLD or PLATINUM status. Silver members do not receive the videos after the testing phase is done. In fact, I am not sure, the videos still might be available to everyone that reads this site. I am not sure. Give it a test. That is what it is all about. We know they work.
Three Videos Are Up At BWT.COM For Subscribers Only…
Today’s Negative-Equity Update
August 18, 2008
Paul Kedrosky submits:
Two fascinating charts from the folks at Zillow today. Both highlight current trends in negative equity — homeowners who owe more on their home than it is worth — albeit in different ways.
First, here is a look at number of homes with negative equity split out by year purchased and by region. Those foolsbuyers who picked up homes in 2006 stand out in a fairly striking way.
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