The market continues to churn at these correction zone, there is furious sector rotation happening with technology stocks catching a bid. With several stocks making 3 dollar plus moves, it was a day for quick buck if you were ready for it and not colored by your bearish hypothesis.
Isn't it interesting that the market in November had several stocks making 10 dollar plus move (around 80), around 20 stocks made 50% move.Over 1200 stocks are up 25% or more in last 65 day and over 70 stocks made more than 100% move in that period. The move started since July and accelerated in November. Then there is a chorus of bloggers, newsletter writers and traders who are complaining about not making money. Some of them are not even beating the S&P. They have several thousand followers who pay them to follow them.
What are these people missing.Their favorite books are books on technical analysis. They all chug around the Bibles of technical analysis-John Murphy. Now if you read John Murphy, it is so simple , all you need to understand is support and resistance, trend lines and patterns. Simple patterns:
* Double Top (Reversal)
* Double Bottom (Reversal)
* Head and Shoulders Top (Reversal)
* Head and Shoulders Bottom (Reversal)
* Falling Wedge (Reversal)
* Rising Wedge (Reversal)
* Rounding Bottom (Reversal)
* Triple Top (Reversal)
* Triple Bottom (Reversal)
* Bump and Run Reversal (Reversal)
* Flag, Pennant (Continuation)
* Symmetrical Triangle (Continuation)
* Ascending Triangle (Continuation)
* Descending Triangle (Continuation)
* Rectangle (Continuation)
* Price Channel (Continuation)
* Measured Move - Bullish (Continuation)
* Measured Move - Bearish (Continuation)
* Cup with Handle (Continuation)
How come they did not find any of these things in 7000 plus stocks in last 65 days. Either they don't understand technical analysis or the market in last couple of months did not follow rules of technical analysis (the simplest explanation for that are : Someone was buying futures in the night, Goldman Sach's changed the commodity Index,the PPT at work, the markets are manipulated, the gnomes are conspiring against mom and pop and so on) .
So why the under performance. They have several rules also. In fact some of them spend more time developing new rules than trading. Everyday I see some trading guru proclaiming his latest set of rules. Watch the reaction of other traders. They get ecstatic, reproducing those rules on their site, printing them and putting them on their trading computer. I often wonder whether they are rule makers or traders.
They use several screeners and fascinated by them. Have subscriptions to high priced data services, multiple monitors, the latest gizmo's, motivational tapes and the works.
So what is the problem. The only problem is lack of profits. Probably many of them are so deeply lost in technical analysis jungle that they can not find there way out of it. So they buy more technical analysis books. Attend more seminars. The cycle continues.
Any method not based on sound conceptual logic has a very low chance of success. If your conceptual logic is correct, even technical analysis will work.Technical analysis is about tactics, it is not about strategy. If your basic strategy is wrong, tactical brilliance does not help. Unless you understand and correct course, you will remain condemned to the deep and dark forest of technical analysis and low profitability.
Here is what I have positions in or made a quick buck our of yesterday or watching:
ALTH,Allos Therapeutics Inc.
ATI,Allegheny Technologies
AZL,Arizona Land Income Corp
BVX,Bovie Medical Systems
BYD,Boyd Gaming Corp
CHDX,Chindex International Inc
COGO,Comtech Group Inc
CVV,Cvd Equipment
FLML,Flamel Technologies Sa
GERN,Geron Corporation
GROW,U.S. Global Invest Inc A
GS,Goldman Sachs Group Inc
HGO,Houston American Energy Corp
KYPH,Kyphon Inc
LNDC,Landec Corporation
LVS,Las Vegas Sands
MIKR,Mikron Infrared Inc
NMX,Nymex Holdings Inc
OSIR,Osiris Therapeutics Inc
STEC,Simple Technology Inc
TATTF,Tat Technol Ltd
WHIT,Whittier Energy Corp
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