Despite the lackluster gains on lower volume, it is still kind of hard to be convinced that shorting this market is a must right now. I know that some of our best setups like ARST and STAR have been taken out just like other beautiful stock setups like COT, ITLN, and DSPG today, but it just doesn’t make sense getting short stocks just yet. When will it make sense? When the volume picks up on the downside and the markets can actually start selling off. To me it feels like we probably will not be far away from a pullback due to the fact that I keep seeing stocks like MYL, ITLN, COT, DSPG, SOHU, ESI, HDB, ATK, SAFM, RYAAY, COL, SNDA, GD, AAN, and RVBD keep showing up. In case you didn’t know almost all of the stocks I have just listed above were looking really good just a couple of weeks ago. Now it is clear something is wrong with them with the heavy volume selloff coming with red BOP. While the overall indexes keep going up, there is starting to be something seen out there that hints to me that we do indeed need a pullback. The IBD 100 and IBD 85-85 indexes put in a negative divergence today to the overall market by finishing lower. Since these are LEADING stocks meaning they are the best-of-the-best on fundamentals and technicals are showing signs that they are weaker than the market. If they show weakness before the overall market that isn’t good. Especially since they never really showed any GREAT outperformance to begin with. I know the IBD 100 and 85-85 were trying to start to take over as leaders recently but if you still look at the overall trend of the RS (relative strength) line to the SP-500 it becomes clear that the IBD indexes NEVER did take a controlling lead off the March lows as the RS line was basically flat to slightly higher against the NYSE. What makes it more bearish overall, however, is the RS lines from November to now. From November to March, while the overall indexes did OK, the IBD indexes lagged badly as the RS lines continued to hit new lows while price took a steeper fall. Since the rally off the March lows, the IBD indexes even lagged the overall SP 500 by a 25% return to a 40% return margin. THIS, MY FRIENDS, DOES NOT HAPPEN IN NEW REAL POWERFUL BULL MARKETS. To me, the time still is not right to LOAD-UP 200% on margin on the long side on the best stocks even with our longs like JST up 14% in two days or our AVNR up 150% in 2+ months. JST and AVNR are not the best of the best but they sure are acting like it proving to me that LUCK is the biggest role in making big money in this market. If this market was of skill the longs like STAR, ARST, and CYOU would be up 14% in two days and 150% in two plus months. Instead stocks like BCRX, AVNR, and ISTA with pathetic EPS/sales growth fly 100% to 200% in months. Go figure. I am sure this will be shorts market soon, as long as this action keeps up. However, one thing going short this rising market proves is that playing the opposite side of the market in a trend is stupid. DHR, ABFS, and LSTR were just three recent reminders of fighting the trend.
new short positions: none
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