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Pradeep Bonde
July 31, 2007
- Market continues to be in red zone with 65 day bull bear ratio at 503/658. First hint of market stabilization will happen when the denominator stabilizes and reverses.
- This correction has been persistently followed by chorus of dip buyers and the market has shown that buying dips so far has not been a good strategy. When enough dip buyers get frustrated and throw in towel, a tradeable rally happen.
- For longer term traders and traders trading momentum based strategies, best option is to sit back relax, let there be confirmation of next up move and then there will be many opportunities.
- We are now looking at corrections starting in some momo names like AAPL, GOOG, RIMM, FSLR, etc. This is good sign. It indicates a hint of fear on part of bulls. When everyone gets too scared to hold overnight position and starts moving to sideline, we may have good bounce. But at this stage I am in the camp of protect your trading capital. This correction has not offered any hints so far that it is stabilizing and it is time to buy.
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6 comments:
It has become very volatile, zig zag market.Some people says Mr Market is repricing risk, for me, I sidelined and watch, waiting for the new leg. Hope you are having fun in your vacation
Pradeep, the other day you said that some of the downturn it was caused by
bear raid programs...can you explain what it is and how it works and if theres bear raid, i assume there is bull raid programs too.Am i wrong?
IBD100 Strikes Again
The value of monitoring leading stocks was revealed in spades on Thursday.
Stocks with the very best fundamentals function like an early warning system for the stock market. Until they sell off in heavy volume, a rally almost always keeps moving higher. As a proxy for this leadership group, I've used the IBD100 since May 2003.
On Tuesday, the NASDAQ fell -1.9%, but the IBD100 went into a freefall. The index tumbled -3.7%, 96 of 100 stocks closed lower, and 54 stocks saw heavy selling. This was highly unusual behavior, and a sign to raise cash.
On Wednesday, the broader market recovered, but the IBD100 kept falling. The selling stayed heavy, and by Wednesday's close, 69 different stocks had seen distribution on one or both days. The IBD100 was now off -4.4% in just 13 hours, and the number of stocks trading below their 20-day had tripled to 62. This was not a good sign.
On Thursday, the meltdown finally spread to the broader market, and stocks had their worst day in five months. NASDAQ volume ballooned 38%, and a stunning 87% of all stocks closed lower. Internals were a mess (see charts), and New Lows flattened New Highs a jaw-dropping 1119 to 105 -- a ratio greater than 10-to-1.
Making matters worse, the IBD100 continued falling hard. The index shed another -3.5% -- nearly twice the NASDAQ's slide -- and 93 of 100 stocks closed lower. 60 stocks printed distribution -- a three-day high -- and stocks below their 20-day increased to 78 -- up from 21 just three days earlier.
DK report 7/24-7/26
Hector,
Does this also work the other way around - when IBD100 moves up strongly in a correction, is that a sign to go back into market long?
Also, today we seem to have seen more dip buyers. This is a bad sign that this correction is not yet over or is it?
Thanks, Joe
Hi Joe, i will let Pradeep answer your question,i think it applies to the IBD 200 strategy too but if you see our Market Monitor stocks over 25% or more in 65 days and down 25 %, you can see the shift how the stocks numbers was droping down, look at 7/23/2007 until today, Pradeep even highlited red the numbers. I always said if you wait for the media tells you, is too late. Pradeep been warning about it for a while, because stock leadership had narrow.Personally, im sidelined until theres a clear signal to buy and when the numbers shift again in the Market Monitor. Just keep a quick daily check when you read the blog.You can see it was accurate and I think it will do the same again when the market turns
STAR reports after the close. I will be watching this closely. Seems like one of the better of the networking IPO's and has a very tight float. Im not speculating pre earnings ofcourse.
Its interesting how well CSCO, JNPR, FDRY, FFIV, etc. have held up during this correction. As soon as the selling paused, they were all right back at multi year highs.
I currently still own WRLS and CROX. CROX is going to $80 IMO before next earings. Eventually it will be over $100, maybe by year end. Both these stocks were ofcourse 100%+ eps EP stocks. I bought them based on Pradeep's method.
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