Obviously with the market down between 2% to 4% today and the NYSE down 47% since January 1st and 49.5% since October 2007, we do not have any new longs today and more-than-likely will not have more than maybe one or two the rest of the week. Sometimes when I do not have longs for a long time, I get the feeling that the most NEWBIE and AMATEURISH of subscribers must be thinking that something is wrong and that I suck because I can not find any new longs or shorts to take. Thankfully, I know 99% of you do not think like that. But I want to make something clear to those that do not understand why I only have 4 longs right now with few to none on my “hardcore” longs watchlist.
In bull markets, depending on how strong it is (up 10% or up 55%), it should be simple common sense to the majority of people reading this that in big bull markets you are going to have a lot of stocks up 50% or more. Let’s take a look at 2003 (the last start of a big bull market from a long bear) for starts. If you were looking for breakouts then, when the indexes were steadily rising over the 50 and 200 day moving averages, you were rewarded with 3 stocks up 1,000% (ZTM was up 8,500%), 41 stocks up 500%, and 587 stocks up 100%. Heck, even if you were a subpar stock picker you could still have grabbed 1,266 stocks that were up 50%. If this looks like a lot, you are right, it is. However, remember that this happened in 2003 and there have been a lot of stocks delisted since then. So there were even more than what is listed now. It is clear to see that in 2003 you had plenty of opportunities to make a lot of money. And if you go review my returns at the end of 2002 to 2004 in either my ‘past big winners’ section or in the videos of the past big winners (gold and platinum only), you can see that I had a FANTASTIC late 2002, 2003, 2004, and 2005. In 2006 it started to get weaker and by 2007 more “perfect” to “near-perfect” setups failed than worked.
Now, if we had such amazing gains in 2003, good gains in 2004-2006, and even some great Featured leftover gains left in 2007 (PLEASE STUDY EVERY SINGLE ONE OF MY ‘PAST BIG WINNERS’–YOU WILL LEARN SO MUCH ON HOW TO SPOT THESE WINNING SETUPS), how is the long side doing now in a market when the NYSE is down almost 50% since the top in October? Well as common sense should tell you, it isn’t doing too well. Not only are there ZERO stocks up 1000% (remember there were 3 in 2003), there are ONLY two stocks up 500% (compared to 41 in ’03). When it comes to stocks up just 100% or 50% (that’s right, I said “just”), there were only 69 and 227 respectively. This compares to 587 and 1,266 stocks in 2003. 587 to 69 and 1,266 to 227 is not very good at all and those numbers RIGHT THERE are all you need to know when it comes to why we don’t have the large amount of winners like in strong bull markets. Not only are there less winners, the stocks that do move are producing a LOT less. 2003 was a bull market. 2008 is one of the worst bear markets ever. Don’t you even THINK about comparing this market to ANY market that was in an uptrend.
If you look at what the price, volume, and BOP patterns looked like in 2002 as the market started to turn and then what it looked like in 2003 as those stocks rallied it becomes clear that massive steady accumulation was all over every stock I got near. There were also a ton of Featured stocks that I did not go long that killed it like STLD, NFLX, EBAY, JCOM, and ERES. So not only did my beautiful charts produce huge gains, Featured stocks that broke out produced extremely strong gains. Right now, folks, not only do we not have anything out there that looks like HILL, EVOL, EPIC, SINA, SOHU, NTES, SSYS, USNA, HRZ, PTT, AFSI, LMLP, TASR, IST(MT), FMDAY, TRAD, MOBE, LCAV, SIGM, NEWP, APPY, and MRVC that were all ‘Past Big Winners’ for me that all setup in the same beautiful price, volume, and max green BOP patterns that you see in each and every one of these stocks but there are barely any Featured stocks that are in basing patterns that could make them a future long.
Out of 450 plus Featured listed stocks, only 24 were above the 50 day moving average. Out of that, there were only 24 stocks that were above the 50 day moving average. And out of those 24, only five were able to produce positive gains. I am proud to say one of those five were one of my four longs: DMND. My other three longs are all still in uptrends and if they do not show me a gain like ANCI with its 59% gain or QCOR with its 11% gain, it is holding up and having its green BOP go to max-green BOP again.
LPHI is still holding in a very tight price pattern with very bullish intraday action. Even though I have a 7% to 8% loss on this stock it is OK. Why? Because it is probably the most pretty chart out there with strong price action, very strong accumulation, and green to max-green BOP that we don’t see much right now. It broke out to a new 52-week high on very strong volume on 10/20 having its BOP surge to high green level. The next day the stock followed-through 3%+ on higher volume with BOP going max-green. Since then it has done its best to shakeout the very weak and emotional investors intraday while recovering and closing well off its lows all the days it does pullback. Today it had a tight price range, low volume, and BOP went max-green again. So even though I am down a little, this is a very pretty chart with VERY STRONG fundamentals (8 quarters of big EPS growth, 7 quarters of big sales growth, 123% ROE!!) and as long as it holds up while the market pulls back, I would believe via the analysis of the accumulation that this stock should do well when the market decides to actual move higher. The Insurance-Brokers is the #17th best industry group out of #197 so that should help. But maybe it will not because LPHI is the only stock that looks “good” out of the group. The whole group seems to be up due to LPHI and the fact that it was already beaten up so much it gets to move higher by default of rotation.
We still do not have ANYTHING that looks as pretty as ANY of the longs that you can find in my ‘Past Big Winners’ areas on the website or in the videos on the forums. Not only that but Featured quality stocks are no where to be found. Everything is a sloppy mess out there and I think it is amazing that we have four longs to begin with. For those of you not familiar with my holding style, I can hold up to 200 longs if 200 longs are moving up 100% or more (I never know which ONE will be the 3,700% mover in 12 months–NOBODY DOES; but we can see the signs of those potential stars). But I would rather not hold nearly that many stocks and focus ONLY on the best looking issues. But when there are too many like there were from 03-06 to even some moments in 07 when the market rallied a lot of Featured quality longs made final hurrah movements. Now that we are resetting bases I am down to less than a handful but I assume if we would have another period like 2003 within the first few months I would have anywhere from 20-50 longs.
We are no where near that time yet. Enjoy QCOR, DMND, ANCI, and LPHI. Hopefully ANCI gets back its beautiful green to max-green BOP heavy accumulated basing uptrend. It would be wonderful to see that in QCOR, DMND, and LPHI also. I am happy with what I have now but if my scans continue to look like they are we probably are not going to have too many new longs.
Before I leave I can tell you two that are setting up with green BOP that my BOP scans are finding before they breakout: STSI and CRD.b. I have been long both of those stocks before, had gains in them, and subsequently lost them. I would love to have another shot at getting back those losses if these two stocks can continue to base out, round out a bit more (or flatten out) on lower volume, and then make gains or breakout on strong accumulation and green to max-green BOP. Those are the only two I can see setting up this moment and they are not perfect.
Great luck out there, stay disciplined, and remember cash is king in this volatile market.
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