<font color=maroon>Shorters are Improvising in this bear market because Analysts, Brokerages and Money Managers thought they wrote the script but we won't go along with the parts that were written for us in their play. We invested during the bull markets, but we watched our portfolios and churned or exited mutual funds timely. We switched from position trading to swing trading to day trading to shorting. We traded and made money. We traded in BEAR MARKETS and made money also. That is what happened. EVERY conservative investor who bought either DELL, CSCO, NT or BRCD or JDSU was kicked in the butt. The downfall did not differentiate between 'smart investors' and 'speculators'... WE gave the warnings, if no one heeded us its too bad. Those are the facts and if the market improves we will get on top of that trend as well.
► brokerages have fended off concerns by customers and keeping them at arms length long after we called our second (first was in July) exit from technology in September.
Our advantage was the experience stemming from 5 years of "Earnings Plays" translating into 20 earnings quarters. Of course we understand that all these quarters were distinct and unique from each other, but each either wreaked havoc or richly rewarded the companies that played the game and beat analysts estimates.
All through past few years (highlights in our SI highlights area on Pristine) we called the trend changes. When we decided to:
► buy and trade the internet sector (i.e. remember VRSN, NSOL, NTBK and BVSN when they were only teenagers)
► exit the internet sector that fateful day in end of March with the sell of NTBK that made SDLI's rise look conservative in comparison
► sell the technology sector with that sell on FLEX, TLGD and my own portfolio (excluding NT which I came to regret but only lost about 30% of a 200% profit)
► trade the technology sector when a new breed of stocks like ELNT, IWOV, CFLO, MCDT, NEWP, EPNY, TLGD could do no wrong
► exit the technology sector.. right before the pre-announcements prior to the release of third quarter earnings reports.
All these major trend changes have ALL had some link with either the beginning or end of an earnings quarter, and the
ensuing shift of sentiment.
We saw what happened with stocks like NTBK, NITE, NSOL and were reminded of that with stocks like JDSU, CMRC, BEAS, NUAN, BRCD, EPNY, NUAN, BRCM, SDLI, EXTR, ITWO, EMLX etc. I researched and looked for parallels and noted that there was a common denominator between the collapse of the internets and the technology sector
► Internet Companies ----> high revenues ---> high prices ----> but no earnings
► Technology Companies ----> with high estimated earnings and growth going forward but estimates were too high and valuations were increasing to precarious and untenable Price/Earnings ratios.
It was not unlike getting cart blanche on a credit card to buy freely and suddenly one day you have to pay the bill. The internet sector folded like a house of cards and now the technology sector folded in much the same way. How did we see that? Because unlike most traders we look at fundamentals, earnings reports, profitability, valuation, cash flow, ratios and we use them to filter our the 'duds' and than find those stocks that are 'technically' poised to break out.
So how come we saw what the suits on the street didn't see? Because the fact that we are traders, leads us to look at the market under a microscope every day, every week for changes of trend, sector strength, where the money is flowing into what companies, price rank, accumulation/distribution rank and why.
The suits, meanwhile, are interested in keeping their own money flowing within their accounts, customers are happy, bonuses are juicy, portfolios are fat, so why rock the boat? Something is wrong, heck, lets raise the price target so we have it 'covered' for another few weeks. Let's upgrade and we can get 10-20% profit in a day for our customers. That should go over very well!
Traders trade daily and can see something is wrong when overbought situations are veritably shouting from the charts and, correspondingly, shortfalls start rolling in and companies are halved. Why are they halved? They are not even worth half is why.
Suddenly earnings prewarnings are increasing among other that those 'most-favored' companies that did so well and only had P/E's of 300-1,000. How did they get so sky high to begin with?
So the house begins to crumble and traders are interpreting the script written for them by analysts, brokerage houses, money managers, etc. So we anticipate more companies warning. They are scared they have to warn, analysts have their share prices on a precipice but allay the fears of the investors by saying "Earnings are going up 200% every quarter"... it will be okay.
It was NOT OKAY.. and here we are now |
