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Joshua "MauiTrader" Hayes is CEO, President and founder of Big Wave Trading Inc., a Maui, Hawaii-based stock market advisory service. Hayes is a well-respected stock trader who combines fundamentals, technicals, psychology and money management to trade professionally for his personal,... More
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  • Free Premium Subscriber-Only Analysis: Tuesday’s Reversal 0 comments
    Oct 8, 2011 3:23 PM | about stocks: TECL, TECS, FAS, FAZ, XIV, TVIX, DRV, TZA, TNA, CPHD, SURG, MNK, OSUR, STAA, ELGX, MAKO, NYMX, ALXN, MRGE, LMNX, BMY, HITK, SIMO, STMP, ULTA, LQDT, BDBD, SUSS, HOTT, GIS

    If you had to envision the most possibly bullish scenario, today was it. The breakdown to new lows yesterday proved to everyone (including me) that the market was ready to crack wide open. The only way yesterday’s breakdown could be reversed is if we had an explosive rally on higher volume the very next day. That is what happened today. As shocking as it was to watch intraday, it sadly was not unexpected. When we were near the lows and started to move and volume was in the second move after a heavy volume move in the morning I knew it was going out at the HOD. It didn’t surprise me at all. What did surprise me was the ferocity of it. Sadly, that puts our new 100% long inverse ETF signal into a neutral signal based on everything that you will read below. The good news, we are locking in some gains. The bad news is that now we wait. Will this turn into a FTD ushering in a new buy signal or will it be a bounce buy signal that will end up giving us a future sell signal? I don’t know but I am preparing for both. The leading stocks right now are medical stocks. Here are your leaders: CPHD SURG QCOR OSUR STAA ELGX MAKO NYMX ALXN MRGE LMNX BMY HITK. On top of that other standouts right now are SIMO STMP ULTA LQDT SMBL SUSS HOTT GIS. So it isn’t the strongest leading group but if we get that FTD not only will a buy signal on TYH/TNA be initiated (it’s possible it could come before a FTD, very possible depending on volume in the indexes, stocks, and ETFs) but we will know where to hunt on the long side for any possible rally. When the rally stalls and hits resistance on volume, we will get another “neutral” signal and wait for a new “sell” signal. Sometimes we go straight from sell to buy and buy to sell but that is not often. On the long side it pays to wait for confirmation. And if any of the signals fail, there are cut loss areas clearly located on the charts of each one. Usually a close below the LOD will always be the cut loss area. Anyways, it’s best to step back and wait here. The market is just too volatile and going through way too much insanity to play it with full confidence. I have my rules. That is what is going to save me. If we rollover here immediately (doubtful, considering the volume) another sell signal will be immediately initiated. I continue to hold all of my shorts as none have given a full cover signal. However, many (11 of the 24 holdings) did give partial cover signals. When you add that fact to the volume on the 2x/3x ETFs and the stock market indexes, you pretty much get the message the market is going to rally here. I am not fighting facts with my ego. I still believe Europe and the USA are done if things don’t change on an economic and political front. A complete overhaul basically. Until that happens, the writing is on the wall and one of these breakdowns is going to lead to complete financial collapse. Sadly, for us long the inverse ETFs and short this market, this most recent breakdown is not it. Stay confident, stay disciplined, stay in control, and do not give up on these signals. Remember, the very first one was on July 27th and I balked!!! Look at how much money we missed out on making there (TVIX, FAZ, TYP). I’m not letting that happen again. I am going to post some comments I posted in the forums showing you the timeline of my decision to go neutral as it played out in the final hour until post-close. I might add some chat room commentary later but it is not necessary.

    During the last 30 minutes of today’s trading session:

    Definitely going to have to sell 50% of our inverse ETF positions with tiny gains of around 10% on each. Still not a full neutral signal but the volume in the indexes and on the inverse ETFs indicate a major change in market action sentiment. The breakdown to new lows yesterday followed by todays rollover to new lows and then the final hour move to the upside on huge volume is VERY bullish.

    We know the market is toast in the intermediate term. However, until the real breakdown gets going, I dont want to lose all of the profits we just had. I will have to go over the charts in depth tonight to make final decisions. It is very possible based on price and volume of FAZ it is a full sell.

    The fed to the rescue!! More heroin mr. stock market? Here you go. Doesn’t that feel good for now. Nice qe3. what a f’ing withdrawal we are going to have.

    During the final 5 minutes of trading:

    FAZ full sell. volume in bank stocks. volume in FAZ. volume in FAS. confirm full sell.

    At the close:

    We got to sell them all. Major major major reversals all over the place. Take the small gains and get out of the way. I actually have buy signals on TNA TYH and FAS. I believe I will be goign long FAS and TYH after my sells of TYP FAZ DRV in the AM. Insanity! I knew it was going to be volatile here but this is beyond hard for new traders. I got this and once these trends hold you can see via the trending times in these ETFs you can get make a ton of money. But stuff like this is definitely going to happen in volatile markets. Nothing you can do about it. If you dont have balls of steel you need to focus on the regular ETFs or the 2x ETFs.

    20 minutes after the close:

    Yes. 100% neutral. Full buy signal comes if we get FTD though because the volume here is huge.

    TNA TYH FAS ERX on watch

    Technically, today, XIV has given a long signal.

    If you are long the 3x inverse ETFs do not doubt my signals. There will be whippy times but when you get a “neutral” signal based off volume and price action in the market indexes, bull ETFs, and bear ETFs you do not ignore it. Today we have a “neutral” signal. take the small gains. Regroup for bigger gains.

    An hour after the close a subscriber ask if he could have the reason for the “neutral” signal:

    Absolutely! :)

    100% neutral.

    It’s based off the volume in the indexes, stocks I watch, and ETFs. All are firing today. That is a neutral signal. It is borderline buy signal. Will need further follow-through. You don’t fight what just happened at all, I have learned. Today was EXTREMELY bullish short-term. Now, if that turns into a new bull market, you will have TYH TNA to make you rich in the next uptrend ALONG with our CANSLIM stocks. For now, its a neutral signal. THere is volume EVERYWHERE to the upside in banks, retail, oil, tech. Volume in bull ETFs are huge. Volume on today’s market rally is huge. This all adds up to “neutral.” You can not stay short this volume and that EOD move. Combine that with it coming immediately following a break to new lows that suckered in late shorts and a market that moved higher in the early hours on big volume, followed by a lower volume pullback, followed by the explosive final hour we just saw and you get “neutral.” This analysis is coming off of over 15 years of full-time market analysis combined with backtesting data on my index charts and ETF charts going back to when the ETFs were born and back to the 1920s where TC has DJ data to.

    Remember, if this rally doesn’t pan out, we will eventually fail at a resistance level and another “sell” signal will be triggered. I am taking all of my signals from now on because of the July 27th swing and a miss on my very first signal. Balking at that signal was just a horrible move on my part. We would all be wealthier had I not done that. Don’t forget the September 1st FTD in 2010 that I said was the start of an uptrend. TYH up 100% from Sept-Jan. This methodology works. The whipsaws are going to happen. Like I said if it is too much, please use 1x 2x ETFs.

    If this rally does pan out, we will be long TYH TNA FAS whatever you like prefer. I like TYH TNA preferably for rallies but ERX will work too. Speaking of that, look at the volume on that today. I am not going to stay short here. I can’t. That would be breaking my rules.

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