Leaders showed up to the party taking the reigns and lead the charge throughout much of the day.  Although, it would have been nice to see these leaders take control earlier in the week.  We simply take what the market gives and run with it.  The positive action being showcased by the leadership is quite positive as many of the individual stocks showed excellent price and volume performance.  They are beginning to take the stand where they simply can not be ignored and are looking like they’ll continue to move higher.

The AAII released its sentiment indicator this week showing Bears were still well in control with a ready over 40%.  Bulls were non-existent nearing 29%.  The crowd remains quite bearish and given the move we’ve seen this week it would lend itself for these bears to exit the market with losses on the books.  The market has simply shown us that it wants to move higher.  In my post Monday I revealed how the market went back into uptrend mode via the NASDAQ positive price and volume action.  Yet, many believe they are smarter than the market and continue to force trades and lose money.  Listening to the market and what is conveying to you is how the most successful stock market operators win and WIN BIG in this game.

The best approach at this point is to not simply chase stocks higher.  This is a very bad habit to get into because there are some leaders who do pull back to pivot points and buying extended will scare you out of a potential winner.  Buying at pivot points will reduce your risk to potential leaders that might pull back to their pivot point and will shield you from getting shaken out.  Remember, chasing is emotional buying and emotional buying AND selling can lead to many trading problems down the line.  It is ultra important to maintain a level of composure and remove the emotional buying and selling to the amateurs (and some “pros” for that matter).

An index that has been slightly overlooked since this market began to rally is the SOX index.  I have noticed many semiconductor stocks have been under tremendous accumulation as of late.  Just today, the sheer number of semi-conductor stocks that I have arriving in my scans is something I simply can not ignore and withhold from this commentary.  In the chart I am about to show you notice how the index is right at resistance.  Normally, this may look like an opportunity to get short but the underlying stocks that make up this index are poised to move higher.  Therefore, it leads me to believe this resistance line will turn into a support line after it breaks through.

Enjoy the Friday market as it is an options expiry Friday for the month of July.  Normally, volume picks up on expiry but not always.  It’ll be interesting to see if buying interest steps up on expiration Friday.

Best of luck, remain positive and enjoy your weekend!

I will make a part two so that I may show so many of you newbies how well stocks acted during the uptrend.

ENJOY!!

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First off, before you go out calling a bottom to everyone you know, remember, we have been here before no less than nine times on the SP 600 and six times on the NYSE, and every time we have heard people come out declaring a bottom they have been wrong. So, please, I beg of you, stop calling a bottom. If anything can be said we have a good chance of a very strong bounce but, come on, perma-bulls let’s look at the facts (I will get to those later).

Second, volume was pathetic. The SP 500 came in with volume above average but sadly this was no impressive showing as volume was lower than the day before. This is a replay of every other rally attempt that has failed since November. Something tells me this will not be any different in a few months. Even worse, the Nasdaq’s volume while a tad higher than the day before (not the convincing 20% over the previous day I am looking for) but it was below the 50 day volume average.

When the stock market has powerful days where the indexes are up over 3% yet volume is below average or weak overall you can almost guarantee that what you are truly seeing is a short-covering rally. Short-covering rallies, unlike the LIE Cramer told you today, do not start REAL! bull markets.

If you go back to the bottom in 2002, you can clearly see that almost every single up day came on higher volume while there were very few heavier volume pullbacks. This is what started to turn the accumulation/distribution rating to an A on the indexes by March of 2003. When March came and the indexes followed-through on huge price gains and volume, it was obvious that institutions went back to work; not short-covering! The fact that we can look at EVERY single major stock market bottom and find a significant volume surge, which is the footprints left by big institutions, with huge price gains proves that the big boys are what makes a bottom. Low volume rallies like this fail.

But the key is your time frame. If we are talking the next few days. Well, heck, duh! Of course, the stupid market could rally for a few days to weeks. But unless there is a day where the market is up 2% or more on volume 20% higher than the day before and above average there is just no way I am going 400% on margin in my IB account. Only a fool would load up here.

And even if this fool did load up here, unless it is the next TASR and he has made a lucky purchase, we can wait 4-10 weeks and wait for that perfect stock like TRAD back in 2003 which went on to make a 500% gain in six months. I wonder how those bottom-guessers did back then compared to Featured investors. I am pretty sure I know.

So go ahead and try to bottom tick GS (which I covered today, btw), I will continue to go long the stocks that show up with my criteria. And then when the day comes where the next perfect stock setups (check out my ‘past big winners’ on my longs section at my .com address to see the chart patterns I LOAD-UP on; you should! be able to see the same similar patterns in each and every one.) and breaks out, I am sure by the end of the run the person that bottom ticked GS will not be getting the return I will be in the next TASR, TZOO, SINA, SOHU, NTES, SSYS, EVOL, EPIC, FMDAY, ALVR, TRAD, IST, DSTI, AFSI, TESO, HRZ, PTT, and many many more.

Right now, the problem with my methodology is that you are not going to find a lot of “hot” charts. You simply can’t. The bear market just started back in November and as anyone that has been following me for a long time knows from October 2002 to January 2007 I was a RAGING bull. After the selloff in February I got cautious but remained bullish and so it remained until November when the internals got really ugly and the charts finally broke down confirming the numbers.

So after being a bull for five years, I changed with the trend and have become bearish. Well as of right now, I don’t see how I can change that opinion until I get more stocks setting up and breaking out of clean bases on my past big winners and the two new longs tonight. Those longs are not perfect but one of them is near-perfect…it is sadly just in a horrible market. If it was “perfect” we could get real big. But thanks to this nutty market we must continue to keep it smaller. Remember, CASH IS KING.

It simply is not smart to trade heavily when there is no clear trend. I want to continue to remind you all that the greatest traders ever (Livermore, Baruch, Wyckoff, Loeb, Dreyfuss, Darvas, Lynch, Ropell, and O’Neil) never bought stocks that were moving down. N E V E R. Why in the heck any of you would want to do something the greatest traders ever did not do is BEYOND me. I simply can not believe we have books out there proving what works from the greatest yet people still do not listen. Stunning. I guess it is too much hard work.

So while I hoard my cash (which is now 50% of my accounts) and wait for those charts to show up that you all can see in the ‘past big winners’ section, there is nothing I can do but wait for those beauties to show up. The last thing I want to do is do what my angry emailer did last week and buy BSC all the way down after buying TMA all the way down from last August. If the greatest traders did not do it, I am not doing it. They definitely never traded like that.

Let’s say we do have a bottom and stocks do head higher from here. The first problem is that our leadership is horrible. We do not have any technology, banking, new fuel, or innovative technology sector leading. Instead we have the gold/silver, chemicals, oil and gas, and other commodity stocks leading this market down. If the market turns and we have to focus on the new leaders, well those would end up being tobacco stocks, oil/gas-US Royalty stocks, gold stocks, small regional banks, and transportation-Rail stocks. If you think this is going to lead to a brand new fresh bull market you are mad! LOL.

These stocks are your typical bear market bounce leaders. They fall the least during the downtrend and when the markets rally they outpace the market thus making good longs as the new leaders. Too bad these new leaders never produce big gains and since so many will shake you out it just isn’t worth playing for newbies. However, experienced investors can see that the Transportation-Rail led today, and has been one of the best groups the past six months moving from number 100 to number 6 on the IBD 197 industry group list, with a 5.1% gain. Then they can go out and get some leaders like KEX, CSX, or GWR. All three have very bullish charts and I guarantee will do a lot better than the stocks the rag-tag bottom fishers are jumping in after. How much more do you think LEH or BSC is going to rally???????????????????????

The fact of the matter is that people are focused on the wrong bank stocks. Instead of looking at this trash that has been CRUSHED and MUTILATED, we can move on to the new leaders like the very pretty HCBK or CBU and even others like ABN TMP OFG and IRW. Compare those charts to the charts of LEH and BSC. Now tell me you were right about telling me to go long BSC a week ago!!I would LOVE to get long HCBK and CBU but the charts must stay green (preferably max green BOP) and the price patterns must round out. If that happens, I wouldn’t mind adding these leaders to my 25% long positions (50% cash, 25% long, 25% short–biggest cash position since June/July 2002).

I know I have said it over and over but please everyone, do not fall for the lies and out-right reckless advice that I am seeing given on TV and on some financial websites. Remember there were 15 ratings on BSC with 5 buys and 10 holds. There was not one single sell. So if you think the sell side has your interest at hand you are very mistaken. They need to sell to you. So when you see these guys come on TV tomorrow telling you that you can’t miss anymore of the gains or else you will be left behind, please remember the following stats.

The other four times (not counting the fifth day since it just happened on 3/11) the DJIA has risen 400 points it has led to a bounce and then a rollover to new lows (July 24, 2002, July 29, 2002, April 5, 2001, March 16, 2000 and now March 11, 2008). The best day for the DJIA was March 16, 2000 when it rallied 499 points. How did that go for the market? As far as I can remember, it went nowhere for six months, and then went tumbling down.

What about the Nasdaq? Since the start in 1971, the Nasdaq’s nine best sessions all came during May 2000 to May 2002, not during the 2003-2007 bull market. Its best day was a 14.7% gain on Jan. 1, 2001. That rally lasted a whole month, before leading to one massive selloff into the post 9/11 lows.

So these are the facts. Facts are what matters in the stock market; not personal opinions. Personal opinions is not going to get you a big winner like EGHT which from the late-October bounce off the 50 DMA to the late-November climax top gained a beautiful 295%. 295% in one month isn’t bad considering that was a full year after the October 2002 bottom. SO WHY DO WE NEED TO PICK THE BOTTOM?????? Exactly! You do not have to. It is a fools game and a game usually reserved for non-Featured experts who don’t need to gamble.

History has proven year-after-year, decade-after-decade that the stock market’s biggest winners all have the same 7 characteristics. They all form to make up the acronym Featured. Once you take the time to learn this methodology and TRUST IT that it will work for you in time, you can transform your life from a lifetime pursuit of mediocre returns to a lifetime pursuit of passions with all the free time you have being a Featured active-investor. If I was ONLY trading my portfolios and scanning my charts, I could get all of this done in 3 hours every day 5 days of the week. Not bad for 15 hours of smart work.

Don’t be fooled by the gamblers who bottom-guess. We have a winning system on our side. Right now, it says, it is best to be patient. Therefore, I will not be pressing anything on the long or short side. CASH IS KING! Aloha and I will see you in the chat room where we have a great crew of professionals and newbies that make me so happy seeing there amazing progress. I am simply amazed guys. You all are amazing. I can not believe how well you are all doing. Keep up the great work!!!! ALOHA!!!!!!

Stocks gapped lower after a horrible announcement by JPM that they bought BSC for $2 a share. Now, while I don’t want to gloat on this, I just want to say that for the 100th time in my life I have warned a bunch of traders to not buy a certain stock and yet they still do it. There was one reader from Santa Barbara from RealMoney.com that attacked me 8 days ago for telling him BSC was a POS. Well here we are from $75 to $4 and yet still no apology. No, thank you. No, I am sorry. Just a big pile of nothing. From Eugj to BHCO to Gerard to WillPS to SCO to Geoffrey from Santa Barbara: all of these characters have called me out and told me that I did not know what they were doing and EVERY SINGLE TIME THEY WERE PROVEN WRONG AND EVERY SINGLE TIME I DIDN’T RECEIVE A SINGLE I AM SORRY OR THANK YOU. Is this what our world has come to?

Oh well, there is no doubt I have become a sensitive character in my old age and things like this bugs me now. I just don’t know how yet to act when it comes to responding to jackoffs that make themselves out to be major idiots. I guess I will learn to ignore it in the future. The exact same way I ignore going long any stock below the 50 day moving average or go short stocks above the 50 DMA.

What is very odd about today that sticks out like a soar thumb is that volume was very lame. Overall, the panic that I witnessed last night in the yahoo message boards about BSC, was completely uncalled for. After hearing of horror margin call, divorce, and other stories, I started to think we could have a crash. When I looked at the sentiment indicators already being so bearish (which is bullish) but yet there were no stocks confirming that this was going to lead to a move higher, I knew that it was possible this could be our 1987. But just like every extreme situation, the damage was contained just to the banks and at the closing bell the DJIA proved why panic selling never works.

I guess I am going to attack today’s post differently considering the nature of the BSC announcement and the reaction by the market. On the DJIA chart I see the average is still abvove the January and March highs and that we have three strong accumulation days out of the past five sessions. This is a pretty bullish development by this index. However, this index always holds up better than the rest so it is pretty much just a flight to quality. You can see back in the bear of 2000-2002 that this index rarely led to the downside. So this relative strength, imo, is just confirmation of the weakness in the market.

The SP 500 has cut the lows of January but still rallied back to hold support. This is a bit of a bullish development on the short term but when I look at the daily chart and see the slope of the 50 day moving average and the angle of the decent I am very discouraged that a rally from here can carry any real power. The 200 day moving average is in a downtrend right behind the 50 DMA and there is no way I can see this index righting itself anytime soon. As for a bottom, you can forget it. Look at the volume compared to the January lows. No way, bottom callers.

The Nasdaq is very interesting as such a horrible gap lower, you would have thought, would have led to a massive volume surge. However, volume came in below the 50 day volume average which absolutely blew me away. The fact something like this happened and volume was lower can only mean one thing: we have more lows to go. There is no way we are going to bottom without a major surge in fear. And lower volume on the Nasdaq is not my idea of a surge in fear.

Another thing that is not my idea of extreme fear is what happened with the VIX and put/call. The VIX, despite all the insanity I saw last night, only hit 35.60 and closed at 32.24. This is not the level that we historically see at bottoms. We are very close but if you know anyone who thinks “THIS TIME” it is the bottom, slap them in the face with a chart of the VIX going back to at least 1987. However, 32 is the highest close in almost a full five years and that has me very happy. However, happy does not equal buying stocks.

The put/call ratio spiked today to a very high reading of 1.41. However, I am not sure what it hit intraday, but really, it doesn’t matter. What matters is the close and when we look at the put/call today compared to the 1.59 and 1.65 readings back in January it is clear to see that the crowd was making more bearish bets then than on today. So, once again, we have another indicator, that though it seems bad, is really not that extreme. So this, with the VIX, the lame bullish reversal, and weak volume all point to a market not washed out yet.

Now all of you know, by now, that I have been advocating cash for months. As the month of February and March went along and finding good short setups and having them work became harder it was clear to see that the smartest thing to do was to raise cash. So after nibbling on some nice shorts, I started to raise my cash position. I raise those cash positions for moments like this.

These big selloffs if they happen correctly usually lead to a very powerful oversold rally that helps produce some nice stocks in a short period of time. However, when those selloffs happen with volume being lame lame lame and no charts showing up, you know it is time to just keep that cash heavy.

Now, two things can happen. One is obviously that we can continue to selloff and look to short stocks. But if that was to happen right now, we simply are not going to find many that can be put out short. The market has fallen too far too fast sending too many stocks past their reasonable areas of getting short. Most of the past big winners to become great shorts would need MONTHS!!! of a low volume rally to set them up. The fact stocks like GOOG and AAPL imploded without giving anyone a chance to enter a large position is just some of the reasons it was hard to short an make a lot of money. But if this market gets ugly, trust me there will be plenty of low volume rallies that will lead to chances to get more short if the trend is down.

The second possibility I am looking for the market to put in for me to get bullish again is to hold these levels the next three days and then to have the market put in a follow-through day where the market is up at least 2% on much higher volume. But for me to want to get long I then need to see a lot of charts that look like either NEU or GTU showing up everywhere. If I get this I would love to get long and start hammering out some big gains that we are now closer to getting with a VIX at 35.

However, the chances of me getting this is very thing I feel as the technical damage is amazingly disgusting and it is going to take a very long time to fix the mess that is now out there. I don’t think that will be anytime soon but God willing let it happen tomorrow. I love to make a lot of money in the market and I miss my max green BOP charts like my last one AFSI in April 2007 to July 2007. So if I can get this I am more than willing to get very long and be very happy about it. But I am an honest man and I don’t see that happening any time soon.

I see the macro data, I saw the Fed, YET AGAIN, place an emergency cut on the lending rate to financial institutions to 3.25% from 3.5%, I saw BSC, LEH, NCC, MF, UBS, and FCSX, and after seeing all of this I have come to the conclusion that we are in some serious trouble but that means only one thing. We need to be looking for a rally.

But looking for a rally, I repeat, is not the same thing as going long. Remember, we are waiting for a follow-through day, the very nice charts, and the sentiment indicators to all line up. Until all of this happens, there is not going to be anything we can do but hold ourselves in a lot of cash and/or let the professionals continue to operate on the short side. This is just the way it is. Forcing trades here is the last thing you want to do. Pushing for anything that the market is not giving you is the way of the amateur.

I saw a new reader place a comment that they went long FCSX as it fell today and learned a very big lesson today. My only problem with this is why did you not listen to my commentary? If that wasn’t going to do it, my bigger problem is why are you buying anything that does NOT look like my past big winners? This is the thing that drives me crazy.

Now, I know that we do not have a lot of near-perfect charts out there (NEU and GTU) and that usually even when we do they fail fast. But the thing to know is that the last one that worked was APPY back in September. Go take a look at that chart NOW! In one month APPY rallied 130%, despite the VIX being below 20. This shows you the power of this pattern. The last one we loaded up on was AFSI in April 2007. That was when the VIX was below 15! and it still produced a 75% to 83% gain in a little under three months. These are great returns and are typical of perfect charts in bad markets (minus the 5 that we cut our losses on this year; INXI BYI BLL SNDA ESEA). Two right and five wrong in THE WORST YEAR FOR NEAR-PERFECT TO PERFECT CHARTS and they still produced for you a 100% gain. Do you see why it is so important to be very right and be a little wrong when you are wrong?

Then why do you buy FCSX? Oh well, I know this trader has a great attitude and I know this will be a lesson worth learning. The great news, hopefully, is that you kept it smart, since I have been emphasizing that and therefore you will be ready for the next long that is the opposite of FCSX.

Another market related item you might want to ignore is the opinions of the dumb asses on wall street. There were five of 15 donkeys that rated BSC a buy. How many do you think rated it as a sell? That is right! NONE! This is just another example of making sure that you never listen to wall street. You can be sure they did not have your best interest in mind.

And since we are speaking of best interest in our mind. We might at well talk about the interest rates that Ben is going to butcher at the next meeting by slashing the 3% rate to 2%. Even though oil fell quite a bit today, I still have no confidence that today is a top in commodity prices and am very nervous about this move. Of course the argument is that higher inflation is better for us than a weaker economy but I think both are pretty bad and since the last time we had this was in the late 60s to early 80s, I recommend every investor go back in time and study that Fed and the market they reigned over.

I am extremely happy today after seeing so many new people subscribe today and so many of my current subscribers thank me for saving/making them a lot of money, while we watched a lot of people go broke today. Anyone that read some of the stuff in the yahoo message board on BSC and doesn’t feel bad, shame on you. My initial pleasure in being right was replaced by a severe disappointment that so many people f’ed up once again. The lure of buying a cheap stock or getting a bargain has ruined them again. I have no clue when these people will learn but hopefully they will soon.

And if you are one of those donkeys (if you bought stocks as this market sold off you need to stand up, and just like an AA meeting, you need to stand up and admit you are a donkey and immdieately head over to my ‘past big winners’ area on my website. If you do not go there and buy stocks tomorrow that are in a downtrend and then lose all or you money I will be happy because in the USA those who are rewarded do their homework, research, and know what they are getting involved with. Those that think getting rich quick in the stock market is the only way to play it deserve to lose it all. For those that went from 100k to -33k by being on margin, all I have to say is you deserve it, if you bought the stock recently.

If you were a shareholder in the company and had no clue about the market like the Enron investors, then God bless you. I am so sorry for what has happened. This is why I hate wall street and believe the fools that feed you advice have only one thing in their interest and that is making a lot of money off of your constant commissions for their brokers. That money then sloshes its way all around wall street and everyone can line everyones pockets.

For those that have just joined up with this team, get ready to start making and keeping your money and do know this if you are here and after a long period of time you see no progress…..this game SERIOUSLY isn’t for you. NO ONE, who learns the Featured system should EVER burn out or go broke. The only people that go broke are the idiots that bottom fish. Don’t be a donkey and don’t be an idiot. Geoffrey from Santa Barbera, BHCO an ex blogger, Eugj from Investors Paradise, Gerard from Brooklyn, SCO a coward who made a comment on my site, and Frank a subscriber who is in love with a pathetic stock called HNSN have all learned expensive lessons and all could have cost you a lot of money. Would any of them ever take responsibility or apologize for their actions? Of course not! Frank is already sending out an email to my partner in crime telling him “THIS TIME THIS IS THE BOTTOM.”

ROFLMFAO. These wall street donkeys never learn!!! Aloha and I will see you in the chat room where there is only one donkey in the room: ME!!! That is unless Frank shows up.

New Shorts:  CNI SCHW

Today was another day in the stock market that has just gone to prove that cash is in fact king. When you try to play a stock market with a heavy hand or even on margin in an environment like this you either have a serious illness or you just have never taken the time to study history and to have learned that the smartest thing to do is NOTHING. A stock market that is this volatile that has THIS MANY BLOWUP is definitely not a stock market you want to be messing with.

I am simply STUNNED! by the number of emails I have received from RM readers that tell me I don’t know what I am doing because I am not buying the bargain of BSC the past five days in a row. First off, the fact that ANYONE in their right mind is buying ANY stock below the 50 and 200 day moving average is pure INSANITY! These foolish investors think they are buying something that is giving them “a once in a lifetime opportunity.” Folks, that once in a lifetime opportunity only comes along once for these guys because they are ignorant of history.

If they have would have taken just a few moments out of their life to have studied the greatest winners of all-time they would have seen that the same patterns show up over-and-over-and-over. I simply do not know how many times you can see a cup with handle breakout from a fundamentally sound company in a bull market in every year, no matter if it is 1880 or 2008, and see those gains that they produce AFTER they are above those lines and say “no, you know, I am going to get this bargain here.”

Well, one of those guys (Geoffrey Lenart), could have cost my butt 60% had I been a gullible idiot. This person sent me an email telling me that I was an idiot for not being able to see that BSC was a “buy of a liftetime” and by not loading up I was “stupid.” This particular (there was more than a few) email was sent on 3/11. Three days later the stock is now down 52%. Amazing.

This follows two others who recently called me out for “not knowing anything.” One was a jerk about it, the other was sincere because I just didn’t “understand” how good it was. The first one was by a poster in the comments section by SCO sometime in February. He said that DRYS had to be bought. Well sco did and so did WillPS. Both of these gentleman said I was basically “not smart” for not buying this stock. Since I was told to buy DRYS, DRYS has fallen 31%.

The last one isn’t that bad but it is just as stupid. A member of the platinum chat room insisted on Friday that I buy HNSN because “it is definitely going higher.” Well let’s pretend I loaded up with 4 to 1 margin on this “for sure” stock. Oops, that was a mistake! When the bell rang to a close on Monday the stock was down 13%. Who is the dumb one now? Let me guess, geniuses, me.

What makes all of this worse is that NONE!!!! of these characters have apologized. I do this for a living. I don’t have time to sit on my ass and wait for a stock to fall 55%, comeback, and then start producing gains. I have to make money now. And there are a lot of ways to do that but there is only one way that can give you the HUGE WINNERS in the best stocks in the best sectors in the bull and bear markets. ONLY ONE. That is Featured. And knowing that, we know via the AAII inividual tracking of I believe 120 (I don’t remember) strategies that the Featured methodology from 1998-2007 has produced a 1,530% return compared to the SP 500′s 54% return. Now I ask you this, unless you are beating that, why would you argue with it? It is just childish to see those returns, then see your lame returns, and then NOT look to change.

But still what if you would have given that advice to buy DRYS, BSC, or HNSN to a gullible old person or widowed woman. Do you feel good knowing that the stocks are down so much and yet even though you believe in it, they need the money and now they are missing 60% of it. What is EVEN WORSE about the BSC example is after I am told to load up I am told by him that he doesn’t have a lot; you know, it was a small position. Just like his purchase of TMA back in early August. He was letting me know about the great 20% dividend I can get from the stock and how I was stupid for not buying it on 3/10. Well, I guess, he is right. Too bad he didn’t buy it then either as a search of his name on google produced a posting on Herb Greenberg’s website about TMA has to be a great long back in August. From that post to the lows on 3/10, TMA lost 96%. Yet according to Geoffrey I am the one that is going to blow up. LOL. You know the guy that has found more 100% to 2000% winners than anyone else I have ever read or met. And the guy who cuts all of his losses making it impossible for a small loss to turn into a TMA. Luckily, I have learned how to use the email blocker and will never have to hear from our friend again. Good riddance to pure rubbish.

Thankfully, horrible human beings like that, don’t last long and if this does turn into the 1970s you can be sure he will remain broke and will never make money in the stock market. Even if he does the returns will be so lame that he wont be able to cover his inflation.

On the other hand, everyone else from RealMoney is extremely nice. However, those guys don’t send 5 emails a day. When you have a stalker you have a stalker. At least a valuable lesson can be learned by all of you who are looking to buy GS or C here. Don’t forget I am still short some GS. Fighting my trend is not a smart idea. You can ask another subscriber named David about that. But really it isn’t me. It is the moving averages. The bottom line is that if the stock is moving up and is above the 50 DMA, I look to get long the bounces off the 50 DMA or breakouts above resistance. When the stock is moving lower I look to either stay in cash, short the bounces off the 50 dma on stronger volume, or short a breakdown below the 50 and 200 day moving average.

Really, though, if you just think about it, it should make perfect sense. You obviously want to be long stocks going up. If you buy a stock and it goes down and you lose money, YOU ARE WRONG. PERIOD! No other f’ing way to spin that. The only good stock is a stock moving higher. If you buy stocks moving up, short stocks moving lower, stay in cash during wild markets, and cut your losses when the stock you buy or short does not do what it does immediately, how can you go wrong? You can not. This is history. This is what the greatest traders of all time did. Not the crappiest traders. The greatest traders.

So now that we understand that I think all of you bottom fishers are freaking crazy, we can almost move on. The last point I want to make is this. When these fools buy their bargains and lose 50% in one day or they actually get it right and get these great bargains that give them a 22% in one month that they sell, take the money and run, and then buy another POS old stock leader that goes up 20%, they forget that I AM SITTING WAITING FOR THE PERFECT LONG TO RIP THEM TO PIECES.

They go and take their 22% “easy money,” forget about the 50% they just lost, and then move into a stock that goes up another 20% and then brag to me. While that happens the bases of the BEST NEXT LEADERS will be setting up. This is when I wait for that breakout in a stock NO ONE has ever heard of to come on huge volume. If it comes with some great fundamentals or the chart is near perfect with max green BOP all over it, I will go long and as you can see in my ‘past big winners’ take what averages out to be 300% gains in five to six months. The stupid 50% loss, 22% BARGAIN!, and then 20% next gain in the next OLD laggard sure does end up looking very stupid when you consider 2000% gains are going to be out there in the next TASR SOHU NTES or heck even 540% gains in SSYS. All of these stocks did that in ten months. I wonder what Geoffrey, sco, and Frank’s returns were for 2003? I bet they were not 500%.

The stock market is a wonderful game and I love to play it. But to want to buy stocks at this point in the market “thinking” we are at extreme lows and can’t go lower is that same stupid cock-sure attitude that ends up RUINING tons of traders. These geniuses simply refuse to study history and it cost them a life of joy and freedom that a life of a self-employed active investor can provide.

Now, obviously, we have some bullish developments in our market. The first I will talk about is the put/call ratio. Recently we saw this average hit 1.41 on Monday. This was the highest it has been during the entire downtrend resumed in January. This was short term bullish. But there are two things here that stand out to me as problems. Which I know, none of the oversold loud-mouths, will pay attention to or care about. The put/call is LOWER than where it was in December when it hit 1.59. So we have sold off on lower volume that led into a slightly higher volume selloff and have gotten more volatile which has subsequently sent the market lower by 15-20%. But with the market almost 20% lower from those levels, the put/call is LOWER at 1.41 than at 1.59. So I believe all this is signaling is that the crowd is too bearish FOR RIGHT NOW. The put/call has been over 1 for a while now, including today’s close at 1.23. These high reading signal that we could see a bounce.

But I ask you, is it bullish that the market is 15% to 20% lower yet the put/call is lower also? The professionals know this answer. You out there who THINK you are a TRUE professional but do not know this answer. Well we know that you are not a TRUE professional. Something is wrong here and, besides oil and gold stocks, I would not want to even play with your money in this market.

Now that we understand where we are at at the put/call, let’s us then go to the VIX. The VIX has finally crossed the 30 level and has made a BULLISH CLOSE OVER the 30 level. The VIX has closed over 31 once already back in January. But right after it did that, it was immediately back down, on its way back to the 200 DMA. This time, though, the stock is closing above the 31 level and doing it with a very bullish intraday session. THIS IS THE FIRST REAL FEARFUL MOVE. Friday was the first day the market has had a fearful session since 1/17.

This is bullish, but it is not bullish RIGHT NOW. You need the stocks in the stock market to confirm WITH this number that we have a real low. With the lack of ANY new leaders out there (oil and gold led back in 2005-2006, don’t forget), you can not say “well the VIX hit 30, let’s load the boat.” That is what an idiot would say that thinks he knows everything. The smart trader will recognize that 30 is high but it is not historically where the VIX hits before launching the greatest bull markets. Normally the VIX will hit 40 for that to happen.

And you newbies that are new to the market that do not know how to look further back than 2003 you better start looking back to 1990. You will see that for the first time since 2004, the VIX has entered its upper range, where some very very nice gains can be produced. However, without a 40 to 60 touch, there will not be any 2000% winners. But now we could find some 1000% gainers NO PROBLEM when the market actually does turn.

Some traders are acting like the VIX is hitting extreme high numbers that MUST signal a move higher from here. Well if I was only looking back to 2003, I can see what you are saying. But even then you can see that in 2002 it hit 50 and in 2003 it hit 40. So 2002 was the bottom that gave us some great leaders. But it wasn’t until our new low was tested that the market took off producing huge winners left and right. Those that were not patient to wait for TASR to setup were caught waiting for DELL CSCO and MSFT to return to their glory days. Too bad it was too late and the stocks were too big.

Those super smart bottom fishers NAILED THE BOTTOM!!! Way to go guys. How much did you lose before you actually got it right? And how much did you make in those stocks by the end of the year? Did you see SSYS ERES JCOM ALVR FMDAY TASR SIGM ALVR SINA SOHU NTES FARO ECIL EVOL? What is funny is even though you NAILED the bottom and I was five months late in loading up in TASR, I still beat the living hell out of your returns.

How did I manage to find TASR? THE SAME WAY I HAVE FOUND ALL MY BEST STOCKS: A PERFECT CHART PATTERN, A PERFECT BOUNCE/BREAKOUT OFF THE 50 and 200 DAY MOVING AVERAGES, A TON OF HUGE ACCUMULATION, AND A CHART FILLED WITH MAX GREEN BOP. TASR passed then and our next huge winner with a perfect chart will come along and pass the test then also. Do you see the chart of GTU? If that stock would have had lower red volume bars in the months of January, February, and March, along with having max green BOP during that time, you would have had yourself our first perfect chart since APPY in September.

Before APPY there was the very last perfect Featured setup that worked (a few failed after this HINTING THAT THE MARKET WAS ABOUT TO CHANGE FROM BULL TO BEAR) that was AFSI in April.

The last sentiment indicator I want to go over is the investors intelligence survey. For the first time since 2005, the bears came in higher than the bulls and for the first time in five years. the bulls landed below 30% coming in this week at 31.1%. This was the lowest in five years and an extreme that we have rarely seen. There is no doubt that the bears at 43% and the bulls at 31% are extremes. BUT REMEMBER THE LAST TIME THAT HAPPENED IN 2002.

It was a low but the market only drifted higher before rolling over making it look like it was about to swoon to new lows. This is when VIX jumped again, the put/call ratio spiked to an even higher level, and the investors intelligence widened again. But this time, there was something much different. The selloff leading to the March lows were on extremely low volume and the move off the lows came with some indexes rallying 3%, 4%, and 5% on HUGE volume. These follow-through days came with breakouts in technology, banks, steel, oil, internet, and housing stocks. It was a very broad rally on huge volume with huge price gains.

This time, we have the sentiment indicators, but the charts are copletely absent of a broad rallying market. Instead it is strictly commodity stocks. This is not broad enough to launch a 40% rally in the Nasdaq in six months. LOL. We will be lucky to get 10% with inflation at the pace it is at. In fact this market appears similar to 1937 via the chart pattern but is more like 1970s with the market, gold, oil, and inflation.

Until I get a real follow-through day on HUGE volume with a TON of charts with HOT HOT HOT chart patterns (you know, the ones in my ‘past big winners’ section–not the “falling knifes.”) breaking out in a wide variety of sectors, there is no way I am embracing the market with arms wide open and on full margin. Gold and Oil stocks are not going to cut it. And, remember, bottom fishers that are going to get your “once in a lifetime” opportunity, I don’t want to hear about it. I could stay in cash four months AFTER you buy and sell your bargains, and by the time the twelve month period is up (ESPECIALLY IN A BULL MARKET; I WILL CRUSH YOU!!!!) I will have returns that will prove your methodology a losing strategy. That is why the greatest traders of all time did not buy falling stocks or short stocks that are rallying. And in markets like this, THEY ALL WENT AND STAYED IN CASH. Only when the trend was clearly down (which it basically is but still we are holding above the very short term lows; not a trading range) did they short. Only when the trend was clearly up did they go long.

Gerald Loeb, William O’Neil, Jesse Livermore, Bernard Baruch, Jim Ropell, and Nicolas Darvas were the greatest traders of all-time. AAII has followed over 120 strategies and found the Featured system to be one of the top three strategies out of the whole group from 1998 to 2008 (1,530% return vs. the 54% return of SP 500). Since 1880 to now all of the greatest stocks of each year in every decade have built the same similar chart patterns, they have had the same similar fundamental growth, and they have all had rising institutional sponsorship. History always repeats itself. There are simply way too many stocks out there and way too many people who are afraid to buy new highs. This ensures us, that when this selling is over we are going to make a lot of money.

We are on the right path, we have the VIX rising, the put/call rising, and the investors intelligence survey has finally crossed. The sentiment is there but the market is without a bid or without buyers. The major institutional investors are not buying stocks yet and that is why we only have gold/silver and oil/gas leading. When I get more charts that look like NEU, GTU, and LSR but are of the quality of NEU ONLY then I will get very excited on this market.

Right now, we are set up for a hard crash with the VIX, put/call, and II being at extremes, yet few stocks showing climatic breakdown selloffs like BSC. So we may have fear with market players. But we have not had the fear of stocks being completely washed out. So we could rally, we could easily fail and fail hard.

No matter what happens, just make sure you keep cash extremely high, your longs in commodities manageable, and your shorts in your favor (don’t carry losses). Be prepared for everything and anything, DO NOT bottom fish, be patient for the perfect setups that will come if we are going to bottom, keep riding those shorts lower pros, and remember CASH IS KING until a clear trend develops.

It definitely has not been easy investing in this market but if you have been listening to me you have been in cash and this market probably isn’t even phasing you. Which is a great thing some of my experienced guys know. The crew that has been with me over a year has been beyond impressive. I am not sure where you would be had you not come here to learn the Featured system but you all have been very impressive. I know some of you went to cash early and missed some nice gains in shorts like AAPL GOOG TSRA SIGM SGMS and GRMN, but even by doing that doesn’t it feel much better than being the guy who lost 80% in January going long over and over on margin on GOOG AAPL? I am proud of you all. You have been great leaders for the new subscribers (minus the one guy who is “too smart” for the Featured system ).

I hope you all have a great weekend. Friday was extremely fun in the chat room. Over 36 people came and went on Friday (yes, I counted) making it one of the most active and fund expereiences I have had in months in there. I think the reason was because we are on the right side of the market: long commodities, short banks and the ex-leading big caps, and HEAVILY CASH. Aloha and I will see you in the chat room on Monday. I am going to enjoy some time in the sun at the most beautiful surf spot on Maui. Honolua Bay. ALOHA!!

New Shorts:  GLBC

Well, I care, and what I care about is making sure you are ready for a potential move higher. Now, while I doubt we are done with our bear market (leadership SUCKS and the economy has JUST STARTED to turn lower), there is a potential bounce setting up.

For the first time since the selloff started, the indexes are now rallying on heavier volume while pulling back on lower volume. The past three days action has been very constructive and with gold/silver and other metal ore stocks continuing their move higher, with a TON of oil&gas stocks breaking out today, I think it is safe to say we can expect a bounce.

For it to be a real bottom, I am simply going to have to see more technology or innovative industries appear in the top 20. Not the crap that is in the IBD list now (please go look at the top 20 industry groups in IBD; if you don’t have IBD, they will be in my RM column on Friday). You will see that all of these industries are BORING, commodity, cyclical, and non-innovative industries. These are all necessary industries. And while a bounce can lead to a very nice rally. You are not going to see a 40% move in six months by the Nasdaq with this leadership.

So be ready for potential follow-through day and look for good places to get long select oil&gas and gold/silver stocks. If the FTD fails, then you know to cut your losses. But God knows if you find a chart you like in a SAFE buying position you better not hesitate and pass it up. A follow-through day should NEVER be discounted but you should only hold the stock if it continues to move up. If it fails and reverses, you know something seriously wrong is going on and it is time to get out.

So, one more time, for newbies, CASH IS KING. For you experienced guys, I assume you have some MTL AUY and others long, it is also time to go out and get some oil&gas stocks too. Not a lot, but with oil hitting $110 and these charts the way they are, it makes sense to get a little long.

Aloha, and I will see you in the chat room, where I will be on, off-and-on. This is my first break since October when I went to San Franfreako. I think I have earned it, especially with some of the lame emails I have received from some really horrible investors/traders. ALOHA!

New Shorts:  HDB WG