There were no new shorts today, even though it looked like there might have been, due to the market rolling over and selling off before a bounce into the close. Sadly, for bears, the last two hours put any stock that was thinking about closing at its LOD out of reach. The strong close took all indexes back from the red back into the black which left most stocks in my short scans with long tails (“hammer” candlestick patterns) that killed the potential for being a new short. However, even if these stocks would have close at or near their LOD it doesn’t matter because we can’t go shorts stocks that are so far extended away from their 200 day moving average. This is the key reason I believe we very well could still have a low volume rally for two months to three months. This would allow us to get long the stocks that are moving now on the long side for the uptrend and then if the rally on low volume ends when the indexes and stocks hit the 200 day moving average we can reverse our longs and get short some of these stocks that are failing right at the 200 DMA, closing near the LOD, on huge volume and red BOP. Until stocks setup in this pattern, even if they rally back to the 200 DMA, there will be no shorting until a failure on heavy volume happens. So remember, even though it seems calm now, it can get very bearish or bullish soon so make sure you are ready both on the long side and down side in case the break happens either way. The short side is still the right side since the trend is still clearly down but there are a few nice stocks showing up that gives me hope that we could get a rally and some nice gains before our next round of shorts. Keep your eyes on these shorts, in case they breakdown or fail: AFAM, CLX, LHCG, ROH, KMB, MLM, ENR, CAT, and PXP. Some are just now cracking so it will be a little while before they setup. But like I said if we get that rally on low volume, I am sure these stocks above will do well. If the rally comes on heavier volume, we can forget about these shorts and instead focus on the longs. Either way, I am ready. From 10/27/08 to 1/26/09 the Nasdaq has moved a DULL -1.09% and the NYSE has moved .93%. If you want to know the definition of a tough market to make money in, this is it! Be careful out there and remember cash is STILL king.
new short positions: none
none
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