GoodVibe’s ALERT – Are you ready for THE bottom?
Good Morning Fools,
Last Friday I gave a fair warning to the shorts to start folding shop and giving a good look to the great fall from 2007 grace where the bulls were chasing the 15000 mark in the Dow to today’s 7000 mark and very soon the high 6000. I told them; “A big short position is like collecting coins in front of a bulldozer. They might call you a hero but they also might bury you the same day.” Today I tell them, “Any short position held overnight is like juggling chainsaws while somebody is pulling down your underpants.” You don’t wanna do it.
Today marks a milestone in my march with the bears for twenty months. I am done! I have a T-stop orders in place for all my leftover short positions (except gold, silver, and miners). I also abandoned successfully my bond trade because I can deploy capital in more rewarding spots. If my stops are not taken because we drift down first, I’ll close them in any washout day with heavy volume including today. This includes the trades I mentioned here - GS, GOOG, AMZN, and WAG. Consider this is your fair and last warning, Mr. shorty.
I’ll be building long positions from today and add to it everytime we pull back. I'll not pick an exact number to start my buying program but will highlight on the charts my buying area. It's time for you to pick your edges and entry points as soon as today. Now, it’s the time to have a shopping list of good quality stocks to hold –not forever- but until next notice that will not come anytime soon. Enjoy the coming rally! Do your homework, invest in what you know well and expect to survive and rally when the time comes.
Here are my reasons of why I am that close to call THE bottom very soon, which might come any day:
1. We got Dow theory confirmation, took 2002 low, and the Transportation is correlating with the industrials.
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2. The wave count is on track. I mentioned in the weekend update that wave iii is not counting correctly. Monday's decline brought it to the right count. Comment #3
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3. The DJIA is closing fast towards a major support area. Watch the Nasdaq and the Transportation falls faster than the DJIA
4. The VIX:
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4. The DAILY SENTIMENT INDEX (DSI)
Market sentiment and contrary opinion as measured by various indicators have been used by traders for many years. The theory of contrary opinion asserts that if a majority of traders agrees on the direction of a market move, then the odds are significant that prices will, in fact, move in the opposite direction. DSI just registered back-to-back days of just 3% stock bulls (Friday and Monday). In 2007 top this reading was whopping 98% bulls! This may be the first time ever that there were back-to-back readings of only 3% stock bulls. This is the most extreme pessimistic reading since October 9. Extreme pessimism is a sign of herd mentality that’s always wrong. I guess this is where the saying; "Sell hope and buy despair" came from. Never follow the herd and when you do, don't overstay your welcome.
5. The selling was orderly without much panic and Monday's volume was lower than Friday’s volume decline. NYSE volume was 109% of its 10-day average. Downside volume led at 80%, with declining issues at 86%, with downside points at 86%. This was not a 90% panic selling down day. Usually Monday after expiration week is a hangover day from the effect of options while Tuesday is informally known among traders as "Turn around Tuesday" where Monday’s direction reverses course on Tuesday. That doesn’t mean we have to because it’s Tuesday, I just thought to mention it along the lines.
6. McClellan Oscillator had the fourth worst reading ever since 1960 - all of which came at major bottoms, a reading of –367.50. This is an extreme oversold condition. To give you an example, On Nov. 20, 2008 the reading was -314.58 where we had a 19% rally after that reading and the worst ever was Oct. 10, 2008 at 415.18 where we had 9% rally.
7. The percent of DJIA stocks above their 30-day moving average fell to an extreme oversold 0 from 3.33. The percent above 10 day fell to 3.33 from 6.67. The percent above 5 day fell to an extreme oversold 0 from 10. The NYSE 10 day average Advance/Decline line indicator worsened to negative –1153.1, an oversold level, close to the negative –1328.2 at Nov. 20, 2008 low.
Now, I'll not keep you busy reading any longer. Start doing your homework and I hope you will do a good one that will enable you to get this right. I hope this added value to your thinking and as usuall I wish this find you and yours well.
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What am I waiting for?