I DARE YOU NOT TO READ THIS
Like Michael Jordan once said, “you gotta leave it all on the court.”
Watching Michael here in Chicago for the many years we were blessed to have him, definitely contributed and helped shape the mental toughness I possess as a
trader. As such, with my commentary throughout this week, I definitely
“left it all on the court.” What I plan to do today is touch upon some
mental preparedness you all need to feel certain of before playing short in this
market environment. In addition, I will display some long-term charts
which may give us a look ahead.
Let there be no doubt, when you are trading the short side, the market will
always make your position a loser before it makes it a winner. This is the main reason that 95% of professional traders trade from the short side while 99%
of amateurs and daytraders trade from the long side only. Further, you
must be prepared to accept a few truths that you must be able to react to:Â
First, there are times you will be wrong, dead wrong, ugly wrong. I, personally, got burned on several occasions trying to short
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and other glamours they made their 4 standard deviation moves into heaven. This is
part of being a trader, if you are wrong you need to get out of your position
and look for another re-entry if you are certain the technicals justify it.
Don’t expect the market to do what you want it do because it won’t. If you
are getting your head handed to you, don’t “hope” for the position to
come back. “Hope” is a very dangerous thing if you are a trader.
Next, just as we are told not to try to guess the absolute bottoms when we go
long and to scale in to the positions, the same must be said for establishing
short positions. There are very, very few times you will be able to
‘top-tick’ your short entry, particularly if you are shorting a chart formation
that is in a congestion zone or a trading range. In situations like these,
the stock will always make a move opposite where it really is going to go in an
attempt to stop out the shorts and suck in more longs. Remember, the market
makers and specialists know where they are going to take the stock and they want
to take as few of us as possible on that money trade. Be prepared for this.Â
Look at a daily chart of
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As you can see, BEBE threw more headfakes at us than Sir Michael did. Ultimately,
the market makers took this stock on the “money trade” with as few of the mentally weak as possible.
Let us now turn to the ultimate “safe haven” sector (according to our selfless
friends at Goldman Sachs, Merrill Lynch, Deutsche Bank, Credit Suisse, etc. as they are selling insider shares of the department stores and
specialty apparel retailers like the world is coming to an end).
As I have pointed out before, the S&P 500 Retailing index broke its
uptrending regression line a few weeks back and has unsuccessfully tried to rally back over this line on two occasions. With Friday’s weak performance
and the vulnerability displayed by the actual S&P 500 index, it appears the
retailing index’s brighter days are behind them. However, so many of
theindividual stocks in this group are being blatantly manipulated so as the brokerage houses can finish selling millions upon millions of stock for
insiders, they probably won’t collapse until this task is completed. For
fun, check out the Chairman and CEO of Jones NewYork
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million shares over the past few months. Unfortunately, the SEC doesn’t
post these occurrences until after they have been sold. That’s fair, isn’t
it? In the meantime, the talking heads and brokerages absolutely love JNY at
these levels, even though the stock is up 100% in the past 12 months. Unbelievable.Â
Just for fun, check out the insider sales on
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are getting away with this.
To the S&P 500 Index:
Not much to say here except that this puppy looks like it is in trouble. That
is an ominous top and breakdown a few months ago. Get ready for some
ugliness.
Let us now turn to the casino of choice for the active gambler and bottom
picker, the Nasdaq.
As I displayed on several occasions, the Nasdaq looks like it has a date with
destiny in the sub 2000 area. The ability of the Nasdaq to selloff so
precipitously this week after recording such an oversold stochastic reading
makes a very large statement about the general weakness of this index. The
bottom picking gurus on CNBC were all WRONG again this week as they tried to
make you throw your hard earned money at the battered techs once again.Â
Even all of Goldman Sach’s horses and all of Goldman Sach’s men couldn’t put the
Nasdaq together again. Maybe Goldman should hire the Professor from the
old Gilligan’s Island sitcom. Heck, he was able to make a short-wave radio
out of a coconut, surely he could repair this Nasdaq.Â
McGyver, take your rolls of ductape and beat it. Even you couldn’t hold together
the tech sector.
Now, to the only safe place in the world to put all of your money… The Dow
Jones Index.
Earlier this week, I bravely (foolishly?) declared the end of the greatest bull
market in history in the Dow Jones Industrial Average. Why did I do this?Â
I did this because the Dow is displaying very clear signs of institutional
distribution on many technical fronts. Forget about the improving breadth
and a/d bullcrap they are trying to sell you on CNBC, this index is being sold
with the fervor of Jennifer Lopez posters to frustrated adolescents. Check
out the “tails” up the weekly chart is showing us. Why is there so much
selling taking place every time this index rallies? The weekly charts are
significant because the tails up tell us that earlier in that week the index was
higher but was sold off later in the week. Very interesting and very
typical of the birth of a bouncing baby bear.Â
Now that the brokerage houses have used up practically all of their tricks to
generate another rally up in the Dow and Nasdaq, the bulls may finally be ready
to lay down their arms and raise the white flag. Unfortunately, I stopped
shorting the technology sector a few weeks ago as I never thought the index
would continue selling off as hard as it has. The risk vs. reward was not
there as it appeared a vicious snap-back rally was coming any day. Looking
back, it appears as though I was fooled by the hype as well. Unfortunately,
the Dow stocks I have decided to establish short positions in have been strong
over the past few weeks. Ultimately, their negative internals and the very
loud messages the insiders in those sectors are sending to us should prevail.
Random Musings:Â Wasn’t it hilarious how Bob Pisani came on TV early Friday
morning and said “a lot of traders are telling me they are covering their
shorts this morning…” Yeah, right, Bob. How about the Easter Bunny,
was he covering his shorts too? Do you really think a professional trader
is going to want the fact he is planning on covering a giant short position
broadcast to 50+ million people before he actually covers??? Unbelievable.
Any suggestions on where I can order a “ThighMaster” and the
“Buns of Steel” videos? Also, does “International
Male” have a website? I heard they have some really cool thongs in their
Spring line.
Have a great weekend.
Goran