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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: oldirtybastard who wrote (16097)	3/4/2002 4:33:14 PM
From: tradermike_1999	Read Replies (2) \| Respond to of 74559

I covered all of my short positions, except GENI and SURE this morning after the Nasdaq made a short dip only to bounce and go through Friday’s high. The market has now definitely broken out of its sharp downtrend. The market didn’t fall as much as I thought when I started shorting back in January, but I can’t help but be pleased. I started building my short position after January 15th and made a gain over 10% on the money invested after covering today - and that is counting a few that I got stopped out of for losses over the past few weeks. So I have already beaten the market so far this year and have built a good foundation for the rest of the year. You’d be hard pressed to find a mutual fund that is up that much already. But we have to keep that going.The question now then is what next and what do we do? First of all just because the market has broken its downtrend doesn’t mean that it is in a new bull market or is going to go straight up to 3,000. It does mean though that the path of least resistance for the short term is up. I’d expect the market to trade with an upward bias for at least the next 10 days and probably for several weeks.Tech stocks are not going to go up up up like they did in the late 1990’s. They are going to be stuck in a trading range for a long time. You can catch weekly upswings and short on the downswings, but they are not in good positions for people who want to buy and hold without using stops or planning ahead. That means there is no need to panic buy just because the market is up. Wait for a dip or pullback and move into positions slowly.I don’t want to throw water on the party, but I have to say it as I see it. I know people want to hear that the market is going to the moon and their tech stocks will go up enough for them to break even or make them millionaires again. And many people will pay good money to have someone tell them that every move down or up on the Nasdaq is a buying opportunity. If you want that subscribe to The Murphy letter. I’m interested in making money off of low risk high reward positions and the newsletter/website is just a bonus for me. I don’t need to tell you what you want to hear, but I need to find good opportunities in the market and adjust to the trend when necessary so that I can make money myself in the market and help you out over the long haul.Unfortunately the Nasdaq tech stocks did not provide a good low risk high reward entry position on this rally. They did not make a panic bottom that is typical of major market turning points. This Nasdaq rally really came out of the blue. And there won’t be a real great buying opportunity in techs until there is a panic bottom - which we’ll see for sure at some point this year.Because of the nonexistent panic bottom I think it is prudent to assume that this move is simply a retracement of the downtrend, which will top out below the January highs. At the moment everyone is bullish on stocks. It is almost breath taking. Even the posters on bear market message boards have thrown in the towel and think the market is going up. Almost no one doubts the market right now. When the herd is all moving in one direction you can make money going with them. The problem is that most people don’t cash out before the herd turns direction and tramples over them. That means that this rally could end on a dime at any moment. My guess is that the market will rally to 1900, 1950, or below the January low. At that point it will resume its downtrend and break through the low of last week and then create a panic bottom. This process will take months to happen and in the meantime we got a few weeks of rallying to go. At worst the market is just going to trade flat and then resume falling in a week. Whatever the case there are opportunities now to make money going long. We will get some opportunities to play short term breakouts on the Nasdaq and to find stocks in good sectors to buy and hold. Hopefully we’ll find some good long term positions with the latter. However, most tech stocks don’t look like they are going to break out and go straight up for the rest of the year. They are still in stage 4 declines or in stage 1 bases. You need a stock breaking out of a stage 1 base or in a stage 2 to find long term holds.Because of that going long on tech stocks will remain a short term 1-3 day affair for sometime. We’ll look elsewhere for long term positions.For example today I listed ASYT, BSYS as short term breakouts. Both are techs and both broke out today and did well with the market. As long as the market goes up I’ll list more stocks like this everyday that you can use for short term gains. On the other hand RINO also broke out. Unlike the latter two RINO is a possible long term hold and will be one for sure if it trades above 9. RINO is in a stage 2 advance and is trading above its 150 day moving average. It also is in a sector, specialty retailing, that has been outperforming the markets. I’ll explain more about my favorite long setups in the next few days. For now check my basics of charting articles available on the website.But the main point I want to you to leave with is this: there is no need to panic buy stocks. The whole key to trading is figuring out where your entry point is and where you are going to put a stop. Then you figure out how much of a return you can expect. People who panic buy or are buying because Maria Bartiromo is excited aren't asking these questions They are the kind of people who will get crushed when the herd eventually turns direction - whether that be tomorrow or next summer. For now we’ll enjoy what the market gives us.One final note. You might want to turn into CNBC’s America Now Show tonight. My bet is the following article and book will be discussed. It is a shocking expose into Jim Cramer and CNBC:http://www.forbes.com/2002/03/01/0301cramer.html These allegations are probably true. But I’d like to add that if Jim Cramer wasn’t such a complete asshole the book never would have been written. I used to follow a website called Metamarkets.Com that was run by Donald Luskin. Luskin ran a tech mutual fund that had to shut down because of redemptions. Cramer hired Luskin to write for TheStreet.Com. After a few months for whatever reason Cramer began to personally rip Luskin in his articles. He would make fun of his fund losses and make statements like he couldn’t believe he made it through college. Luskin then left TheStreet.Com. Even if there was a real problem with Luskin’s employment publicly attacking his character and reputation was not the way to go about it. And more likely this was just a Cramer ego game. This would follow his past behavior patterns with people as outlined in the Howard Kurtz book The Fortune Tellers. If Cramer wasn’t such a jerk this new book and the current allegations about Cramer wouldn’t have come out. This is man who has earned his enemies in all of the wrong ways......and to close I’ll use Cramer’s own words:"We have laws in this country against getting long and loud and making stuff up and dumping it into the hoopla you created. Arguably these laws aren't easily enforced. Arguably these laws are a bit Pollyanna-ish. People come on television all of the time and do this. We know it. That doesn't make it right. It doesn't mean that the Feds shouldn't investigate it because it is "too prevalent"...Pumping and dumping is wrong wherever it is done. That's common sense and the law. If you violate it, you better expect the Feds will come calling. When they do, you should stop your behavior or pay the price." From Cramer's attack on Jonathan Lebed, the boy who thought his britches were big enough to pump and dump stocks like Cramer has done on CNBC but wound up with an SEC investigation and interview on 60 minutes instead. abcnews.go.com