Market Talk with Piranha is currently moving to its new home at The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Thursday, May 18, 2006

Did the NASDAQ surprise you?

I wanted to share with everyone the analysis I posted up to MSW screens last night because it makes a firm point that some just don't get! Some investors continue to be surprised - can't help everyone!

MSW mid-week analysis (5/17/06 9:00pm):
I am extremely happy over the e-mails I received today, commenting on the expectancy post, from both MSW members and non-members. It means a great deal to see that so many people “get-it” and how a simple spreadsheet helps so many more get that “ah-ha” feeling. I am going to follow up that post with an answer to another question on expectancy tomorrow. I will continue to feed you these advanced strategies in stages so you can digest what I trying to convey.

Now, I don’t want anyone to write me an e-mail asking “what to buy” or “why is the market going lower”. Hey, if this is harsh, so-be-it because I can’t spell out the dangers in the market any more clearly than I have over the past two weeks. I have been uploading a red bold text warning that “NOW IS NOT THE TIME TO BUY” with the first portion reminding you about the ‘M’ in CANSLIM. I even provided a link to my article from last year on the ‘M’ in CANSLIM. If you buy in this environment, be prepared for days like today and be prepared to take heavy losses. When I slash the MSW Index down to 14 stocks, it’s for a very good reason: the market is WEAK! It amazes me that some people don’t “get-it” and must be invested at all times trying to pinpoint the bottom while searching for opportunities on the long side.

When my daily and weekly screens go blank or get slim in size, it is the best indicator to me that it is time to ease off margin, move to cash and entertain the idea of going short. When speaking about going short, you should start to analyze sectors or industry groups that are in late stage bases or contain stocks that are violating moving averages and support lines (simultaneously). To confirm the screens, the NH-NL ratio has tuned negative (the number one reason to stop placing long positions). I said this just last night after a period of strength among some of the recent leaders:

“Even with the strength of our leaders today, I am still playing heavy defense due to the negative reading for the NH-NL ratio for the second day this week: 99-138 (74-241 yesterday).”

5/15/06 & 5/16/06:
“Tonight’s daily Screen is a pure Watch List looking for potential buy candidates in the future. The market health is weak so sit tight and brush up on your trading skills, system development and money management techniques.”

“We have now witnessed six distribution days for the NASDAQ and four for the S&P 500 over the past month (clear signs of institutional selling).”

“Both the NASDAQ and S&P 500 have violated their 50-d moving averages as the NASDAQ fell over 4% to close slightly higher than its 200-d m.a. The Index has closed at its lowest level since the turn of the New Year. If it violates its 200-d m.a., I see it traveling down to the long term trend-line that started in the summer (July) of 2004.”

The NASDAQ is now trading below the 200-d m.a. and is sitting on the long term support line that dates back to 2004. Violating this trend line will be a major red flag.

“Unless you are a day trader, I advise that you take some time away from the markets and regroup. I am going on a mini-trip over Memorial Day weekend and I suggest that everyone else take some time to enjoy other things or at least take a small break from trading (especially since our market environment has turned negative).”

“The MSW Index is now going through some of the most dramatic changes in over a year. If you want me to post “buy candidates” then you don’t understand how the markets work. I am sorry but now is not the time to be buying (in my opinion) based on all of my indicators.”

“The leaders are getting crushed and the NH-NL ratio is declining with a negative day on Friday.”

“As we start to hit this stretch, follow the rules and never break a stop loss (it might even be time to take a break and enjoy the sun)!”

To top off all of these quotes, I wrote an extensive analysis last Saturday documenting the six month period between May and October (focusing on the weaker summer months since 1950). I showed you how stocks start to take breathers and decline during the months of May and June.

The DOW came within 80 points of its all-time high last week but we are traveling different waters this week as the index is now trading below the 50-d m.a. for the first time since late January and early February. Today’s 214.28 drop on the DOW was the largest percentage drop since May 2003 (that month of May again). The index was down 1.9% on volume 22.9% larger than yesterday (clear signs of heavy distribution). Want me to sound crass? I was not hurt by the drops in the market over the past five days of trading and I am extremely proud. I use the arrogance to help get the message into everyone’s head!

The NASDAQ is now showing a 0.4% loss for 2006 and is 7.6% from its 52-week high. The NASDAQ 100 is now 3% below the 200-d m.a. as 191 of the 197 industries tracked by IBD closed lower today (many on increased volume). The seven distribution days over the past four weeks should be sounding alarms to protect your capital. The NH-NL ratio closed at 56-250 today, continuing the streak of negative ratios.

The ‘M’ in CANSLIM:

Take a look at the Industries that fell the most today (do they have something in common):

Steel & Iron
Oil & Gas Drilling & Exploration
Industrial Metals

*No new stocks will be screened tonight for good reason – I hope you get the point*



At 4:58 AM, Anonymous Anonymous said...

Chris, could be a bear market if companies are earning money and job claims are safe under 230K ? Do you know if is there an example in the past historically ?



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