Gary’s Quarter In Review
Well, it’s
that time again. It’s the “quarter in review” edition of my
TM commentary. What a quarter it was as the major indices were trashed. First,
let’s review and then a look ahead.
My first report was on July
2…and flat out, nailed it for you based on my “insider selling”
theory. In that report, I mentioned 84 stocks (mostly Technology) which had large amounts of insider selling after
major drops. Logic dictated that all this selling meant a lack of
confidence throughout the industry…and it would probably be not a smart thing
to own them. After all, why own a stock when the people running the company
don’t believe in it?
When you have time, you may want to go
back
to the report and check out the names and the drops for future reference.
This stuff does not happen by accident. I have tested it throughout the years.
After looking at the numbers, they staggered even myself. Of the 84 stocks, one
stock was up, one stock disappeared and the rest were down. How far? On average,
all stocks listed were down an average of 49.6%…and that’s just for one
quarter…let me repeat…49.6%. Very simply, if
you followed my lead, you would have saved a ton of money. Several names were
down over 80%. If I didn’t do another thing right
during the quarter, I think I would have been satisfied with just that call. But
in the spirit of full disclosure, we move on.
I next identified that the markets were starting to act a little suspect around July
6. That is where I started to write about several leading sectors breaking down, as well as the major indices.Â
In spite of that, one of my donut-head moves was to issue any longs in any
report while the market was acting suspect. In the July
13 report, I mentioned a few names. I get a big yonk for that as I should never go
against the prevailing winds.
July
18 was another good report, one of the quarter’s best. I absolutely nailed
the fact that several key Technology stocks were breaking down all at once. That
was pure sector analysis. I urge you to take a look at that
report. Whenever a bunch of names in a sector break down at once and on
heavy volume, alarm bells must go off. During that report , I also mentioned the
classic “double top” that
(
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PowerRating) was putting in at the $45 level.
Needless to say, that bad boy is trading a little above $23 at this juncture.
Like a dummy, I listed a few more breakouts in my July
20 report. Didn’t learn a lesson from July
13. Hey, that’s why I do this review…to get
better. Another big yonk for trying to fight an uphill battle.
August
1 had bad and good. I mentioned a couple of mid-level base breakouts in a
couple of Semis. What the heck was that about? I have never been a big fan of
mid-level bases because there is still resistance to overcome. It must have been
the lightning strike. But, during that report, I
mentioned
(
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PowerRating) was heading for lower prices because of its high volume
breakdown…and also mentioned not to believe all the talk about the strong New
High List…and that it was filled with a bunch of non-operating companies. I
will call that report a tweener with good intentions.
I consider my August
8 report a classic piece of American literature. OK…just a joke. I started
out the report with two very important lines: “I need
to be very serious with today’s report, especially if you had any hope of the
market breaking to the upside. In fact, just the opposite is happening.” I
then went on to show charts of the major indices starting to gag. Little did I
know just how bad things would get.
The rest of my reports for the quarter were mostly short and to the point. STAY
OUT OF THE MARKET’S WAY AND IF POSSIBLE, DON’T PLAY THE GAME.
So, all in all, I like the quarter. Protection of capital was key and for the
most part, I kept preaching it throughout. I hope you agree and most importantly, I hope you found value with them.
Now, to Friday’s action. Yes, Friday’s action qualifies as a follow-through day.
But, definitely go slow. Leading stocks are not to be found and stocks are still
way below their moving averages. The move does fit in well with the high bearish
sentiment and oversold readings that I have recently written about. Some of the
readings like Put/call ratios hit multi-year highs.
I must say that I did not think the
markets would cover so much ground during the week…but facts are facts. I
still believe it is in the context of a bear market and needs to be respected.
If that changes, I will change. Keep in mind, normal bear market rallies are
quick, sharp, suck investors in and bury you quickly. Remember January and the
March/April period. Seems like last week is showing two-thirds of those same
characteristics. The other problem with bear market rallies is that the best
moves are reserved for the stocks that were the most oversold and had dropped
the farthest. There were a few breakouts but let’s get more proof before we get
crazy. The markets are going to remain news- and event-driven and tricky. Hold
on to your hats.
P.S.
Only five days until TradingMarkets2001. I
am looking forward to meeting you there and teaching you six of the most
important ingredients for monstrous breakouts, both to the long and short side.