After Market Close May 7, 2004
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Really Rotten on the Outside and
Inside!
That's what the action was on Friday. Breadth was some of the worst I've ever seen with
3184 declines and 259 advances. That's pretty dramatic, and yet, while the price action
wasn't good, it wasn't a blood bath, either. The Nasdaq actually spent much of the day in
the plus column, which, to me, was utterly amazing.
Still, all of this internal damage has to be indicative of some selling growing to a head,
and if it doesn't correct, there could be some real trouble ahead. The Silver nucleus of
this horrific day, and what's amazing, and what's definitely worth the price of admission,
was Doug's performance. I'll take a little credit for helping on the overall exposure
levels, but everything on Doug's position list, INCLUDING THE LONGS, was a winner for us.
That's one to be proud of!
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DJIA: The Dow does look like it needs to see at least 9900 to complete the
correction (if that's all it is). |
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SPX: The S&P 500 just looks sick and I'm thinking that the 1067 target
is a shoe in. If the wrong type of news comes out, however, we may see lower targets. For
now, however, be prepared for some chop and bounces. We're oversold. |
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NDX: The relative strength was amazing in the Nasdaq. I think it sucked some
bottom pickers in, and too soon at that. |
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QQQ: In our other service, we have a short still on the Q's. Frustrating that
it's not lower. |
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HUI: Gold will continue to fall until the Bulls give up. It may be fast or slow. |
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XAU: That's pretty ugly. |
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VIX: The VIX is up above it's Bollinger Band and that is often an indicator that
a bounce is due. It's important to note that the VIX is not that high, and given the risk
and the damage that higher rates are doing, it can rally much more before a rally is
triggered. |
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NIKKEI: Our illness is causing some sniffles in Japan, too. |
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DJT: The Transports are supposed to be a sign of a strong economy. Maybe not! |
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DJU: The Utes are in trouble until the Bond Market finds it's feet. Don't ask me
where that is. |
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CMR: The Consumer stocks are looking sick and I expect that they'll tank further
if rates don't come off a bit. |
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DJUSHB: I think the Home Builders are finito. There may be a bounce in this one,
soon, but it probably won't last long. |
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NVR: Whoooowee! That's an owie. Wish we'd have had room for that short! |
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XNG: Natural Gas is looking very iffy, I personally hope it breaks down. $500
heating bills do that to you. |
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OSX: The Oil Service stocks ought to be doing better, you'd think, but they
aren't. That's a sign of real weakness. |
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BKX: Banks are not surprisingly getting clobbered. |
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SMH: The Semi's were up, and it's pretty amazing that Doug picked one of the few
stocks that was up, in a market that only had a few hundred advancing issues and thousands
of decliners. |
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IWM: The Russell, is, I think, about to go into a very rough period of
underperformance. |
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REV: Revlon really came on for us and I'd normally be amazed that again Doug
picked a winner when almost EVERYTHING was down (259 issues up, 3184 issues down). Still
after dozens of times, I get used to it and just smile and say, "I'm glad he's on our
team". |
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VLNC: Valence was up too! He had less than a 10% chance of picking a winner, and
yet he did (and not only that, but it wasn't a defensive stock!), AGAIN!! |
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ALEX: That Alexander and Baldwin played perfectly for us and we took some partial
profits at 30.46. |
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CKFR: Check Free fell too soon for us. |
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DG: We also took partial profits on Dollar General at 17.88 |
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DNDN: Let's hit this one on the short side, if we can. |
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SWY: Safeway can bounce so let's see of there's a play for us. |
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| QLGC: QLogic looks like it
could pop, and this would act as a nice hedge if the market tries one of those sharp
oversold bounces. Use care, because we're fighting the trend and Doug will be away from
his machine in the morning. If we have thoughts, we'll try to send out an update. |
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Summary:
Overall, I'm as scared as Hell by the current market and the miserable breadth, but I'm
pleased as punch by our positioning and our picks.
We have been doing very well and it gives you solid confident when you go through a
miserable trading day with all your positions up on the day. Let's try to parlay that into
a low risk approach to playing what will likely be choppy week. Longer term, we probably
have more downside to come, since the pessimism has not yet risen to levels that will
provide fuel for the next rally.
Be Well, and Trade Smarter Than the
Average Bear!
-The ChartSmarts Team
Mark, Doug & Holly
Current Positions:
Long 50% REV at 3.21, stop at 2.97
Long 50% VLNC at 4.51, stop at 3.89
Long 50% VLNC at 4.45, stop at 3.89
Short 50% ALEX 31.37, stop at 32.9. Target 27.8
Short 50% DG at 18.69, stop at 18.69
Watch List:
ALEX: Looking to short 50% on a limit of 31.3, stop at 32.65. Target 27.8
DNDN: Looking to short below 12.89, stop at 14
SWY: Try a bid at 21.43, stop at 20.95
QLGC: Looking to buy above 27.33, stop at 26.93. Ignore the 30 min rule*
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