Tic Tac Toe
I had some great comedic thoughts for the report
today, but in light of the horrific market action, maybe next time. First off, I want to thank everyone for the kind e-mails you sent in regarding my last
report. It is humbling that my words and thoughts can affect so many.
My stance has not changed one iota on the market. The only decent news is that
finally, after a 67% drop in the Naz, and the latest whacking in the Dow and S&P,
the mainstream media is finally talking bear market, and loudly.
Sentiment is also turning bearish:
Put/calls, VXN, VIX, ARMS, front covers of bears, investors asking more about shorts than longs and rumors of mass firings of
brokers. This is a good start. But…these are secondary
indicators.Â
Stock price
performance is the only thing that matters. And to be blunt, it is a horror show.
Every major chart is extremely bearish with absolutely no end in sight.
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The last shoe to drop was the Dow.
This is one of the worst-looking charts I have seen in years. One big giant top,
a 50% retracement and then a subsequent failure. There is now just about no place to
hide. To make matters worse, the Semis are now toast as they are now playing catch-up with the
Nasdaq. (That Goran guy is good.) As an intermediate-term trader, the market reminds me of
Tic-Tac-Toe. There is just no way to win the game, so why play?
Last but not least, I wanted to discuss one of my disciplines. I am talking CANSLIM.There have been questions as to whether it is still valid when the market is so
viciously bearish. The answer is absolutely “Yes.” It is called “M” for the
market. When an investor can recognize a bear market, he or she knows to just stay
away. This is the only reason I have been keeping my powder dry during these tough times.
I am also being asked about the “follow through day.” The answer is that all new bull markets have started with
one, but not all of them lead to one. You will know it is for real when a bunch of names are setting up and breaking
out. This action is not even on the radar screen right now, which leads me back to
Tic-Tac-Toe.